Making Card Payments before Chapter 7

[WJL]

Hi team,

Does it help to pay off or pay down credit card balances before filing for Chapter 7? I am curious if CC companies will take that into consideration at all. 

Looking forward to hearing from you all and thanks in advance! 

[Datx]

I'm going to say no. You are still going to cause the creditor a loss when you include them in your BK. Also you want to avoid paying one creditor over the other right before filing BK. The trustee can mark this as a preferential payment. 

[Anonymous]

You should be careful and read the laws pertaining to preferential payments towards unsecured creditors within the 90 day window preceding the filing date.  They may "clawback" or call back the debt from any unsecured creditor that received in excess of $600 within that 90 day window.  Paying "insiders" such as family and friends more than $600 within the 12 months prior to filing can get you into hot water too.  

The laws are in place to make sure that all creditors get an equal shot at any assets the debtor may have and circumventing that just to exclude as many other creditors as possible to have fewer black marks" associated with the filing just raises eyebrows and makes things more complicated than they already are to begin with.

[WJL]

Thanks, that's helpful. It looks like completely paying off balances can cause issues. I have been just paying the minimum payments when they are due . That shouldn't be considered preferential, right? How about redeeming reward points from my credit cards? Should I just forget about that?

[Pway]

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@WJL wrote:

Hi team,

Does it help to pay off or pay down credit card balances before filing for Chapter 7? I am curious if CC companies will take that into consideration at all. 

Looking forward to hearing from you all and thanks in advance! 

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I am not sure if you met with an attorney or not yet, but he/she  will tell you to stop making all payments at once.  The creditors will see bk as it is a public record.  As others have stated paying off or down balances before a bk is preferential treatment and the trustee can or will dismiss your case.  

I would highly suggest that you do not do this.  As I look in your signature Amex, Chase and Barclay have a long internal memory when someone has IIB.  BK is something that should be taken seriously.