It’s tempting to think you’ll just get through the holidays before facing facts and filing for bankruptcy. I’m all in favor of facing facts and righting the listing financial ship, but your ability to get a bankruptcy discharge can be impacted by your spending behavior in December.
I’m talking about your use of credit cards for the holidays. Use your cards now and file bankruptcy later and you risk the discharge of that debt.
Credit card issuers who believe that some part of the debt owed to them was incurred by the card holder without the intention to repay can sue the debtor in their bankruptcy proceeding. The creditor is seeking a determination under Bankruptcy Code Section 523 that the debt was incurred by fraud and should survive the bankruptcy case.
My clients often think of their available credit on a credit card as an asset, just like money in the bank. They think it’s theirs to use, regardless of their current circumstances which call into question their ability to repay the loan. In fact, the space between your balance and your credit limit is just the amount of additional debt that the creditor is willing to allow you to incur, based on your promise to repay it with interest. If you take the loan knowing you won’t repay it, you’ve defrauded the creditor.
So, put the plastic away now if bankruptcy is part of your New Years resolutions. Move to a cash economy and get a complete discharge in a simple bankruptcy case next year.
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