Contact Bob Today

Colorado Springs Bankruptcy: Credit Card Use Might be “Fraud”

Using your credit card to buy holiday gifts could result in your having to pay that debt, even if you file for bankruptcy.  As a Colorado Springs Bankruptcy Lawyer, I often explain to my clients that the Bankruptcy Code sometimes presumes such use to be fraudulent.

If you use credit to purchase luxury goods or services in the three months before filing your case, the Bankruptcy Code may require that those debts be repaid. Specifically, the Code provides:

If you spend at least $500.00 purchasing “luxury goods or services” from any single creditor within the 90 day period before you file, there is a presumption that this debt is fraudulent and therefore nondischargeable in your case.

The word “luxury” doesn’t just mean things like diamonds and furs.  It means anything that’s not “reasonably necessary” for your support or maintenance, like food or basic clothing.  As a Colorado Springs Bankruptcy Attorney, I once represented clients who used credit to purchase tools and materials to do some basic home repair.  I advised them to hold off on filing their case, but they insisted that it be filed ASAP, with the result being that they ended up having to repay Lowe’s for the stuff they bought.  The moral of the story, at this time of the year, is that most Christmas gifts, even inexpensive ones, under this definition, would be considered luxury items.

There are slightly different rules for cash advances. For cash advances, the amount is $750.00 and the time period is 75 days before filing your bankruptcy case.  In the case of cash advances, if they meet the above criteria, they are considered nondischargeable, no matter what they were used for.

What this boils down to is that if you use your credit card or take a cash advance in order to purchase holiday gifts, and then file your case within 75 or 90 days, you are most likely going to have to pay the bill or repay the cash advance.

Of course you can probably avoid these problems by waiting to file your bankruptcy case more than 90 days after using credit or more than 75 days after receiving a cash advance.  But even if you wait, there’s a possibility that the creditor will be able to show that you used the credit card or obtained the cash advance at a time when you were thinking about filing for bankruptcy.  In that case, the debts may not be dischargeable.

The best way to avoid this problem when doing your Christmas shopping in Colorado Springs this year is to not use credit and don’t take a cash advance, especially if you’re thinking about filing for bankruptcy in the near future.

Sorry, comments are closed for this post.

If you need help, please don't wait for things to just get worse.
Call me at 719 227-8787 or just fill in the form.
I'll get back to you right away.
  • Your personal information will remain secure. We won't share your info with anyone. Ever.
SpringsBankruptcyLaw.com is provided as a public service by Bob Doig, a bankruptcy lawyer in Colorado Springs, Colorado. If you want to discuss a specific issue, ask a question, or even complain about something, please don't hesitate to contact me:

Bob Doig
Robert J. Doig, Attorney at Law
2985 Broadmoor Valley Road
Colorado Springs, CO 80906
719 227-8787 Office
719 325-8355 Fax
Info@SpringsBankruptcy.com
HTML/PHP
Robert James Doig LLC is a BBB Accredited Business. Click for the BBB Business Review of this Attorneys - Bankruptcy in Colorado Springs CO