If I Charge On My Credit Card And Don’t Make A Payment, Is This Fraud?
By Rachel Lynn Foley, Kansas City, MO, Bankruptcy Attorney on Jul 2, 2008 in Bankruptcy Cases & Legislation, Bankruptcy Myths, Bankruptcy Practice and Procedure, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, General Bankruptcy Information
Creditors these days are looking for any and all ways to prevent debtors from discharging their debt in bankruptcy. As a result we are seeing more and more allegations of fraud.
The most common fraud allegation from the creditor is that you, the debtor, charged on a credit card and made absolutely no payments or very few payments before filing bankruptcy. Therefore, in the creditor’s mind you knew or should have known when you charged on the card you could not pay back the debt.
So in essence you stole the product/service and committed fraud. Seems pretty black and white if you listen to the creditors.
Judge Dow out of the Western District of Missouri does not think it is just that cut and dry. In his opinion of Case: G.E. Money Bank v. Wyble, Adv. No. 07-2047, Judge Dow stated the the creditor must prove several elements before they could win on an argument of fraud that would result in the debt being non-dischargeable under §523(a)(2)(A).
The first element of fraud is whether or not the debtor made representations. Judge Dow has stated that the debtor using a credit card implies the representation that the debtor has the intent and ability to make the payments. This is an automatic slam dunk in favor of the creditor with respect to the first element.
The second element the creditor must prove that the debtor knew that the representation was false at the time he or she presented the credit card. In this particular case the debtor charged $15,000 before bankruptcy and only made one payment. Therefore, this must be fraud according to the creditor. However debtor’s counsel was able to show that at the time of the charge not only did she intend to pay back the money but she intended to NOT file bankruptcy.
I think this case is a preview of what lies ahead for debtors when they file bankruptcy. The creditors are now going to be looking at a time line of events. When were the charges made? How many payments were made? When did they seek the advice of an attorney?
In this case Judge Dow agreed with debtor’s counsel and ruled against the creditor ordering the debt to be discharged.
Get the facts before you file bankruptcy. Despite what your friends and family tell you, YOU CANNOT RUN UP YOUR CREDIT CARDS BEFORE FILING BANKRUPTCY.
Be informed, be aware and talk to a qualified attorney before you file bankruptcy. Remember that knowledge is power. This power will help you regain financial control.
Written by Rachel Lynn Foley.
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