Can You Use Your Credit Cards in Brainerd Before Filing Bankruptcy?

You have had a good paying job and also using your credit cards for purchases like any other person would when the unthinkable happens: you either lose your job or for some reason your income decreases.  The dam is about to break and there is no relief in sight because you now have these credit card bills that you previously had been able to pay and had every intent to pay back.  Bankruptcy seems like the best option to get your life back, but you have heard that your creditors will cry “FRAUD!” because you have been using your credit cards recently and you fear you need to wait 90 days before you can file bankruptcy.  Your worry is that you simply cannot wait any longer.  You do not want to be accused of fraud, but you also do not think you can wait 90 days before filing for bankruptcy.  You need relief sooner rather than later.  What can you do?  What SHOULD you do?

I made a big purchase on my credit card, now what?

Making a luxury purchase on a single card of more than $650 within the 90 days before filing is something triggers the presumption of fraud.  What is this “presumption of fraud” exactly?  Basically, it is a presumption of having bad faith whereby the creditor does not need to first prove bad intent, but it is simply presumed and those particular charges are presumed to not be dischargeable.  In other words, a presumption that you made purchases and did not intend to repay the debt.  This does not mean that it will be found to be fraudulent.   Well, how do you overcome the presumption of fraud if you did make these purchases but did not, in fact, have bad intent?  You will need to prove you had intent to pay the debt at the time of the purchases.  We take a look at the circumstances before and after the purchases, as one way to show good intent.  For instance, perhaps right after the purchases, something catastrophic happened: you lost your job unexpectedly or you had a large uninsured loss such as a vehicle that you had to pay out of pocket for.

What are considered “luxury purchases”?  Luxury purchases are basically purchases which are not necessities.  Also, keep in mind that if you have made large purchases, even outside of that 90-day window, that does not mean a creditor can’t object on the basis of fraud, it just means there is not an automatic presumption.  If you have any of those purchases, talk to one of our attorneys about it and determine possible outcomes.

What if I took out a cash advance before filing?

Cash advances taken out within 70 days before filing are treated the same as luxury purchases.  If you have taken out a cash advance of $750 or more in the 70 days before filing, there is a presumption of fraud and that debt is presumed to not be dischargeable.  The same rule that applies to luxury purchases also applies for overcoming the presumption of fraud.  

Interestingly enough, balance transfers can also create a stir in the bankruptcy world, so if you have done some balance transfers, it will also be important to let us know.  They don’t have the same presumption of fraud as luxury purchases and cash advances, but can still raise some objections, which would need to be addressed.  

What SHOULD I Do?

If you are considering bankruptcy, stop using your credit cards: that is the safest bet.  But don’t worry about your past use.  Let the staff at Kain & Scott take a look under the hood and see what is going on.  We can help you map out the best solution for your situation and navigate through any potential presumption of fraud (remember, a presumption does not mean you ACTUALLY committed fraud, so instead of letting the stress and worry take over your life, come in and talk with us and let us help).  

How do I get started?

The first step is calling Kain & Scott and setting up an initial consultation (it’s FREE!).  You can also schedule this online at our website via the chat function.  Once you sign up, we do the heavy lifting for you, whether you will be filing a Chapter 7 or a Chapter 13!  We pull your credit and asset report and fill out the petition and associated schedules based on this and other information we get from you (such as vehicle titles, tax returns, and credit card statements, among other things).  The next step is a review and sign appointment where you spend time with a legal assistant and an attorney going over all of the information contained in the petition and schedules to ensure it is all true and correct prior to filing.  This meeting takes approximately two hours, but it is imperative that we spend time making sure everything is accurate as you sign the documents under penalty of purgery.

Once the review and sign appointment is complete, your bankruptcy petition is usually filed within a week.  You will be required to take two credit counseling courses (one before you file and one after), which can be done online.  Four to six weeks after you file, you attend what is called a meeting of the creditors (formally called a 341 meeting).  An attorney attends this meeting with you.  Someone from Kain and Scott is with you every step of the way throughout your bankruptcy (and even after!).  If you filed a Chapter 7, your debt is usually discharged within a couple of months of the meeting of the creditors.  If you filed a Chapter 13, your payment plan is confirmed after the meeting of the creditors and you make your payments for the duration of your payment plan, after which, the remaining balances on your dischargeable debt is discharged.

WAIT! There’s more!

No, there is not more for you to do, but Kain & Scott does more!  After your debts are discharged, we don’t just shove you out the door and wish you luck.  We also have a FREE 90-day credit repair program that we offer to our clients to assist them in achieving their post-bankruptcy goals.  We care about our clients and we want you to succeed, so we do our best to ensure you have the tools to do so.  We want you to succeed and get your life back.  Give us a call today at 1-800-551-3292 and let us prove it!

Kain & Scott, P.A.
100 South 5th Street #1900 
Minneapolis, MN 55402
(612) 843-0527
info@kainscott.com