Credit Card Use Before & After Bankruptcy

by John Skiba
Contact

The use of credit cards has become a normal part of life for most people. For many of my clients, credit cards have been used for groceries, medical bills, and other necessities of life. The result is a huge amount of debt that many are in no position to ever pay off. I see clients on a fairly regular basis with more than $100,000 in credit card debt. This type of debt almost always leads to a bankruptcy filing. Once the decision to file for bankruptcy is made it is necessary to evaluate and alter credit card use before the bankruptcy is filed and to understand how the bankruptcy filing will impact your ability to use credit cards going forward.

Credit Card Use Prior To Filing Bankruptcy

Once you have made the decision to file for bankruptcy you should stop all credit card use. The bankruptcy code provides that some debts incurred immediately prior to filing bankruptcy can be considered non-dischargeable, meaning that they will not be eliminated in your bankruptcy case.

Credit Card Purchases Within 90 Days Prior to Filing Bankruptcy: Credit card purchases for luxury items that total more than $600 within the 90 days prior to your bankruptcy filing are presumed to be non-dischargeable. The bankruptcy code defines “luxury item” to be goods or services that are not reasonably necessary for the support or maintenance of your household. What does this mean? Charges made on the card for gas, groceries, or diapers are likely not going to get an objection; charges for a new flat screen or charges for your Mexican cruise likely will.

It is important to note that the law says that such charges are “presumed” to be non-dischargeable, meaning that the credit card company would have to seek to have the debt declared non-dichargeable by the bankruptcy court.

Cash Advances Made Within 70 Days Prior to Filing Bankruptcy: Any cash advance you take on your credit card over $875 prior to filing for bankruptcy is presumed to be non-dischargeable. This includes things such as using credit card checks. While there is some wiggle room when it comes to purchasing “luxury goods,” if you take a cash advance within the 70 days prior to filing bankruptcy and the credit card objects, we will lose that battle. Again, the credit card company will have to make an appearance in your bankruptcy and object to that specific debt being discharged.

There are basically two ways to deal with credit card issues prior to filing (1) don’t buy anything or take a cash advance from a credit card; and/or (2) wait to file your bankruptcy case so that you are at least 90 days from your last credit card purchase/advance.

Credit Card Use After Bankruptcy

A common question I get is if there is a credit card where you are either current on the payments or there is currently no money owed can that card be kept open. My answer is don’t plan on it. With the tightening of credit standards I have not seen a credit card company agree to keep a card active after bankruptcy in years. Even if you don’t owe any money on a particular card, it will likely be closed by the lender.

For many this creates a panic because a credit card is necessary for work or travel. You will be offered credit cards after filing bankruptcy, but these cards will have very high interest rates and I wouldn’t recommend them. Another option is a simple debit card or a secured credit card. Secured credit cards report to the credit bureaus like a regular credit card, but they require a deposit to be put down in the amount of credit you want. For instance, if you want a credit card with a $1,000 limit, you are going to have to put down a $1,000 deposit which the credit card company will hold as collateral to be used in the event you default on your payment. There is a good listing of secured credit cards offered at www.bankrate.com .

If credit cards are causing you problems, a bankruptcy, and particularly a chapter 7 bankruptcy, can get rid of your credit card debt and help you get a fresh start. I offer a free bankruptcy consultation to discuss your specific situation.

Arizona bankruptcy attorney John Skiba can be reached at 480-464-1111.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© John Skiba, Arizona Consumer Law Group, PLC | Attorney Advertising

Written by:

John Skiba
Contact
more
less

Arizona Consumer Law Group, PLC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.