Credit card debts are unsecured
debts that are dischargeable in bankruptcy. However, if the debt was incurred
because of a non-dischargeable item in bankruptcy, it will not be forgiven by
the courts. For example, if you paid a non-dischargeable tax obligation with a
credit card, the credit card bill will not be discharged because the taxes are
non-dischargeable.
Credit card bills are mostly
wiped out in bankruptcy but the courts will also determine whether you made the
purchase in good faith. The following are some of the factors which are going
to be considered.
The court will scrutinize the
status of your finances when you made the purchases using credit card. If it
turns out that you could not possibly pay back the charged amounts, the court
may presume that you used the card knowing that you could not possibly repay
it. It will also be considered how many charges were made. In case there were
more charges prior to the bankruptcy filing, it would appear that the debtor
was attempting to abuse the bankruptcy.
The amounts you charged on your
card will also be scrutinized. If the luxury items bought within the past 3
months prior to the filing exceed $600, the court may suspect that you defraud
the credit card provider. Small amounts for basic needs are not usually scrutinized.
Your spending pattern will also
be checked. If you want to file for bankruptcy should not change spending habit
within the months leading to the bankruptcy; otherwise, you might find it hard
to justify in court. Multiple purchases within a single day are going to be
scrutinized as well.
It is also a factor whether you
had a job or income at the time you were using your credit cards. Your
employment prospects will also be considered. If you have no job or income you
should not be using the credit card. It will be seen as fraudulent when there
is no logical expectation that the money owed will be paid back. Charges on
basic necessities will not be scrutinized in general, while charges on luxury
products or services will be a problem.
If most of your debts are credit
cards, there is a chance that one of your creditors will file an adversary
action and proceeding against you. This is where a credit card company claims
that you should not be relieved from your obligation to pay. It is possible
that a creditor may charge you of committing fraud in incurring the debt. The
credit card provider might claim that it would be unfair if the debt is
discharged. For this reason it is a good idea to see a bankruptcy lawyer before
filing.
The best way to steer clear of
problems like these is to be truthful with your credit card use in the first
place. Quit using your credit cards immediately if you really want to file
bankruptcy. It is almost certain that if you accumulate large credit card bills
within 2 to 3 months of declaring bankruptcy, that debt will not be discharged.
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