If you're planning to file bankruptcy, there's a significant deal of preparation that extends beyond completing the taxing paperwork. What you do or fail to do before filing for bankruptcy can lead to the bankruptcy court dismissing your bankruptcy request. That's why it's important to seek the legal services of a bankruptcy solicitor in order to boost the success of your bankruptcy. One of the mistakes to avoid prior to filing bankruptcy is running up the balances on your credit card. Read on for more insight.
Filing bankruptcy allows your discharge all your credit card debt. However, if you use all your credit card balances just before you file bankruptcy, chances are that it won't be wiped out in bankruptcy. This is a clear case of intention to swindle your creditors. The credit card company will file a non-dischargeability petition against your bankruptcy case, requesting the bankruptcy court to declare your credit card debt nondischargeable.
Buying luxury goods
Even if your intention is not to defraud your creditor while running up your credit card balances (i.e. you're planning to repay every coin), you may still land in trouble if you use the credit cards to purchase luxury goods and services within a few months before filing bankruptcy. Examples include buying a jet ski or taking a 2-week luxurious holiday vacation. In this case, fraud is presumed. To get these debts discharged, you will have to prove that the luxury goods or services were necessary for the well-being of you or your loved ones which is quite hard to prove. Additionally, you will also need to provide evidence that you actually intended to pay back the debt or you didn't foresee yourself filing bankruptcy anytime soon.
Do not take significant cash advances just prior to your bankruptcy either. Generally, cash advances surpassing a given limit from a single creditor within a few months before your bankruptcy case are assumed nondischargeable. This raises a key point. If you attempt to avoid the assumed limits, by taking an amount that is almost equal to the given limit, the creditor can still argue about your false pretenses, and if you're attempting to avoid the presumptions, it may appear like you're not honest and may attract undesired attention from the creditors as well as the court.
In conclusion, your bankruptcy solicitor will advise you to cut up your credit card and use alternative sources of income for about three months prior to the bankruptcy. Obviously, not using credit can be rather challenging, especially you've become used to it, therefore it makes sense to develop some practice prior to filing bankruptcy.Share