Before filing bankruptcy should I max out my cards first?

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Question:

I have several credit cards and will be filing for bankruptcy very soon.  Can I max out my cards before filing?

Answer:

The federal bankruptcy laws include exceptions for discharge.  If you charge in excess of $1,150 within two months prior to filing for bankruptcy, your trustee and the bankruptcy court may prevent you from discharging that debt.

Credit card companies can challenge the discharge of their debt by filing an adversary proceeding claiming that the debt was incurred by fraud and should be excluded from discharge.  This is sometimes called a “non-dischargeability action”.  Credit card debt may be non-dischargeable in bankruptcy if either of the following is true:

  • The credit card application the individual submitted to obtain the card contained fraudulent information; or
  • The credit card was used without any intent of repayment.

The longer the length of time between your credit card usage and the bankruptcy filing, the less likely it will trigger a challenge regarding dischargeability.  You should seek advice from an attorney specializing in bankruptcy law for further information.

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