09 Dec Credit Cards and the Christmas Holidays – a Dangerous Combination
Seasonâ€™s Greetings â€“ and a word of caution.
This is a wonderful time of year, a time for giving thanks, for counting blessings, for sharing joy and for giving to others. The natural desire to express our love through gifts burns strong in our hearts (and the fire is stoked by incessant advertising.)
This year, however, is also a time of financial difficulty for many families. Some people, under great financial duress and deciding that they are on the verge of bankruptcy anyway, may be tempted to go on one last holiday splurge, figuring that their credit card debt will be discharged when they file for bankruptcy in January. My simple advice is: â€œDonâ€™t!â€
As its name implies, certain provisions of The Bankruptcy Abuse Prevention and Consumer Protection Act were put in place to discourage abusive practices. Specifically, debts incurred with no intention of repayment are deemed fraudulent and are non-dischargeable.
Section 523(a)(2) of the Bankruptcy Code provides that â€œconsumer debts owed to a single creditor and aggregating more than $550 for luxury goods or services incurred by an individual debtor on or within 90 days . . . ; and cash advances aggregating more than $825 . . . or within 70 days before the order for relief under this title, are presumed to be non-dischargeable . . . â€
â€œLuxury goods or servicesâ€ do not include goods or services reasonably necessary for support or maintenance, but Christmas gifts are not considered â€œnecessary for support or maintenance.â€ Also, Section 523 includes another test: whether the credit was obtained by â€œfalse pretenses, a false representation or actual fraud . . .â€ This would include charges of luxury items made just before filing, since there is no intent to repay them.
The bottom line is that non-essential credit card debt to any one creditor totaling $550 or made within 90 days of filing, or cash advances aggregating $825 are presumed non-dischargeable.
Finally, even if your use of credit cards falls outside the 70 day or 90 day windows set out in Code Section 523(a)(2), creditors may still challenge dischargeability of debts if there is significant use of unsecured credit when there is no reasonable expectation that you can pay it back.
Discharge litigation is expensive and you most definitely do not want to face the unpleasant prospect of paying your bankruptcy lawyer a retainer to respond to a dischargeability complaint. In my office, I regularly advise clients to wait weeks or months and to make “good faith” payments if there has been recent credit card use – I find that time and evidence of some effort to pay minimizes the likelihood of dischargeability litigation.
In short, this season (and all other seasons, for that matter) is a good time to find ways of expressing love and appreciation without spending money you donâ€™t have.
by Jonathan Ginsberg, Atlanta bankruptcy lawyer
Jonathan Ginsberg, Esq.
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