Debit Card Paper Trail Could Come Back to Haunt You in Bankruptcy!

06 Jan Debit Card Paper Trail Could Come Back to Haunt You in Bankruptcy!

After filing a second Chapter 13 bankruptcy for my client, the Trustee asked for the Debtor’s bank statements to cover the sixty days prior to filing her new case. All I could think of while reviewing her bank print-out was “WHAT WAS SHE THINKING!”

Most of the transactions on the printout were done on a debit card – which is okay. It was what the purchases were for that is the problem. Most of the debits were for massages, nail salons, eating out (and at expensive restaurants), movie rentals, clothes (at stores that are not cheap), and other non-necessary items.
If a person is in financial trouble, these are not the types of items a debtor should be spending money on. Debtors in Chapter 13 are required to commit all of their disposable income to the repayment of their debt. Based on the printout my client gave me, it is quite obvious she isn’t doing this.

I have the predicament of – if I don’t give the report to the Trustee, the Trustee will file a motion to dismiss her case – and, if I give the Trustee the printout, the Trustee is going to file a motion to dismiss the case because she filed her case in bad faith. Either way, my client’s case has an extremely high probability of being dismissed. My client will probably lose her home and car.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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