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Using a credit card before chapter 7

kobe2012
Established Contributor

Using a credit card before chapter 7

My friend is thinking for filing for chapter 7. She owes $50000 in cc and $17k auto loan ... will be filing jointly with spouse... question was she used the card for $7000 two months ago ... she only makes $40000 a year... been trying to get by for two years since spouse lost job ... would she get in trouble for the charged she made??? Is she better off waiting to file? She's afraid of presumption of fraud .... any input will be appreciated

 

No lates ever ... no past dues ... and should she stop making payments?? The $7000 was from synchrony .. and $35000 was from synchrony cards


Starting Score: MYFICO 12/30/15 -TU: 481, EQ:561, EX:532 - BK7 DISCHARGED 12/2015 - Current: 09/01/2016 TU:642 EQ: 651 EX: 646
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Message 1 of 12
11 REPLIES 11
Thelongcon
New Member

Re: Using a credit card before chapter 7

When I filed it was about 8 months after having done a large balance transfer (over 10,000) that BoA deposited in my checking account. The money was to purchase inventory for a business that failed.

 

My lawyer was concerned about it and told me that I should be prepared to speak about the nature of my business and how the money was used.  When I went to my meeting of the creditors, I was only asked out of amusement what the name of my business meant, but he didn't care beyond that.

 

I would imagine ymmv, but the nature of the expense probably matters to a large extent.

Message 2 of 12
kobe2012
Established Contributor

Re: Using a credit card before chapter 7


@Thelongcon wrote:

When I filed it was about 8 months after having done a large balance transfer (over 10,000) that BoA deposited in my checking account. The money was to purchase inventory for a business that failed.

 

My lawyer was concerned about it and told me that I should be prepared to speak about the nature of my business and how the money was used.  When I went to my meeting of the creditors, I was only asked out of amusement what the name of my business meant, but he didn't care beyond that.

 

I would imagine ymmv, but the nature of the expense probably matters to a large extent.


How many months did u wait to file after u did the balance transfer?


Starting Score: MYFICO 12/30/15 -TU: 481, EQ:561, EX:532 - BK7 DISCHARGED 12/2015 - Current: 09/01/2016 TU:642 EQ: 651 EX: 646
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Message 3 of 12
NormanFH
Super Contributor

Re: Using a credit card before chapter 7


@kobe2012 wrote:

My friend is thinking for filing for chapter 7. She owes $50000 in cc and $17k auto loan ... will be filing jointly with spouse... question was she used the card for $7000 two months ago ... she only makes $40000 a year... been trying to get by for two years since spouse lost job ... would she get in trouble for the charged she made??? Is she better off waiting to file? She's afraid of presumption of fraud .... any input will be appreciated

 

No lates ever ... no past dues ... and should she stop making payments?? The $7000 was from synchrony .. and $35000 was from synchrony cards


She better have a REALLY good explanation, otherwise it will be considered a presumption of fraud. I would suggest she wait at LEAST 6 months before even talking to an attorney about BK.

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Message 4 of 12
donny10
Senior Contributor

Re: Using a credit card before chapter 7

And presumption is just that, presumption, not proof. You can make a rebuttal. This gives the creditor the advantage if you made a luxury purchase or a cash advance within 90 days of filing.

 

The creditors also have up to 60 days to complain after your meeting of creditors as well. But the advantage of presumption will be gone as noted above if you wait 6 months or better. They can still complain when you file, but they wont have the presumption advantage waiting 6 months.

Message 5 of 12
donny10
Senior Contributor

Re: Using a credit card before chapter 7


@kobe2012 wrote:

My friend is thinking for filing for chapter 7. She owes $50000 in cc and $17k auto loan ... will be filing jointly with spouse... question was she used the card for $7000 two months ago ... she only makes $40000 a year... been trying to get by for two years since spouse lost job ... would she get in trouble for the charged she made??? Is she better off waiting to file? She's afraid of presumption of fraud .... any input will be appreciated

 

No lates ever ... no past dues ... and should she stop making payments?? The $7000 was from synchrony .. and $35000 was from synchrony cards


If she plans on filing BK and can't afford to pay, then she should stop paying. But that's up to her. She should speak to a Lawyer regarding when to stop paying.

Message 6 of 12
leonel9
Frequent Contributor

Re: Using a credit card before chapter 7

How she spent the $7,000 will make a difference in a creditor deciding to object. How was the money spent?

 

I didn't notice it mentioned specifically, but luxury purchases greater than $650 made 90 days of filling are presumed to be fraud. As others have stated, your friend may want to wait six months. Although the presumption disappears after 90 days, a creditor may still object if they believe they have a strong case. 

Message 7 of 12
Rhonda9080
Member

Re: Using a credit card before chapter 7

I did a couple of smallish balance transfers (under $100) and used a card to be part of a debt settlement I signed on today. I did this due to emergency hurricane expenses. I hope that doesn't hurt me. I actually didn't make up my mind to do the resettlement thing until today, when I realized how serious it was that all but one of my cards was near to maxed (abt 2,500 each). After reading these posts, I hope I haven't hurt myself unwittingly. 

Message 8 of 12
kobe2012
Established Contributor

Re: Using a credit card before chapter 7

The lawyer she spoke with recommended her to file in January .. just to let time pass and was told it should t be a problem then... and to make payments on that card that was used until January and stop paying the rest ... she screwed herself up with that charge ....

@rhonda , I'm not sure how debt settlement works but with bankruptcy, you shouldn't use ur cards prior to filing ... period.. good luck with your settlement

Starting Score: MYFICO 12/30/15 -TU: 481, EQ:561, EX:532 - BK7 DISCHARGED 12/2015 - Current: 09/01/2016 TU:642 EQ: 651 EX: 646
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Message 9 of 12
Kb109
Frequent Contributor

Re: Using a credit card before chapter 7

Should she file after putting that much on credit 2 months before filing? Hell to the nah nah nah!! Don't do it! Any good attorney will tell her to wait a MINIMUM of 90 days since last credit card use. To be safe, some will even suggest 6 months depending on the nature of the debt. Your friend sounds like a good candidate for bankruptcy but she HAS to stop using the credit cards! I had a few charges on my Discover two months before filing (less than $100) for groceries only. These were necessities and not "luxury goods" (this term is extremely vague in BK and doesn't mean what I figured it did). She should make some consultations with bankruptcy attorneys in her area and ask for their advice. But no more credit card usage!!! Can't stress that enough. 

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