Yes, you can talk to a bankruptcy attorney within 90 days of using your credit card, taking out a loan, or other recent debt.
Many times, a person is trying to stay above water financially. They take out loans or apply for new credit cards. However, it does not take long for them to realize that they are sinking faster than they realized. Yet, how will it look if they talk to a bankruptcy lawyer soon after incurring recent debt?
Ideally, you should stop all new debt as soon as you know you will file for bankruptcy. There are a few reasons you do not want to file bankruptcy with recent debt.
You could be accused of bankruptcy fraud if you file for bankruptcy relief with recent debt you intended to erase. Taking out new debt with the intent of filing bankruptcy is fraud.
Creditors could file lawsuits against you within the bankruptcy case to ensure recent debts are not discharged. Furthermore, you could face bankruptcy court penalties for incurring new debt to erode it in bankruptcy.
Cash advances over $1,100 with a single creditor within 70 days of filing bankruptcy are presumed non-dischargeable. That includes credit card cash advances and payday loans.
The creditor can file an adversary proceeding to object to the discharge of the recent debt. An adversary proceeding is a lawsuit filed within a bankruptcy case. It would be up to you to prove that the debt should be discharged. The bankruptcy law “presumes” you intended to file bankruptcy to get rid of the debt.
However, creditors can file adversary proceedings for cash advances older than 70 days. The only difference is that the creditor would need to prove that you took out the cash advance with the intention of filing bankruptcy to erase the debt.
Credit card purchases for luxury items from one company over $800 within 90 days of filing bankruptcy are presumed fraudulent.
The credit card company can file an adversary complaint objecting to the discharge. The creditor does not need to present evidence that you intended to erase this recent debt. You have the burden of proving the debt was not fraudulent, or the credit card company wins and you owe the debt.
Like cash advances, a credit card company could file an adversary case for any amounts incurred within 90 days of filing bankruptcy or outside of the 90-day period. However, the credit card company has the burden of proving fraud.
Generally, credit card purchases that were not for luxury items within 90 days of filing bankruptcy are dischargeable as unsecured debts. The creditor would need to prove you made those charges with the intent of never paying the debt because you intended to file bankruptcy to get rid of the debt.
For example, you met with a bankruptcy lawyer and then charged hundreds of dollars in food, clothing, household goods, and other “essential” items. Within a week, you hired a lawyer to file a Chapter 7 bankruptcy case. The credit card company might argue that you were “stocking up” on essential items before filing bankruptcy with the intent of never paying the debt. In that case, the court could agree with the credit card company.
When you are struggling with debts, it is likely that you have used your credit cards or taken out a loan to pay debts and living expenses recently. Most people seek bankruptcy advice because they cannot make ends meet. It is not illegal to seek legal advice whenever you need advice about bankruptcy laws. However, the bankruptcy attorney will likely tell you not to take out any new loans and stop using your credit card immediately if you intend to file bankruptcy.
Unfortunately, many people cannot continue paying the minimum payments for their loans and credit cards AND pay their living expenses without using credit. Be honest with the bankruptcy lawyer. Tell the attorney about all recent debts and what the money was used for when you incurred the debt.
An attorney reviews the debts to determine if any of the debts could be non-dischargeable in bankruptcy or considered fraudulent or abusive. A bankruptcy lawyer can help you devise a timing strategy for filing bankruptcy that avoids the presumption of non-dischargeability. Your attorney may tell you to stop paying specific debts to have money for your living expenses. It might cause a decrease in your credit score, but you can work to rebuild your credit rating after bankruptcy.
REMEMBER: Honesty with your bankruptcy lawyer is the key to avoiding problems with your bankruptcy case.
An experienced bankruptcy attorney can generally find a solution to issues they know about before filing. However, finding out that you hid recent debt after your case is filed limits what the attorney can do to help you.
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