If your credit card and other debts are too great, you might be considering bankruptcy. It would be advisable to brush up on bankruptcy law as it relates to your situation. In brief, the laws have gotten much stricter. Those filing bankruptcy are having to pay back bigger portions of their their debt. There are even times when creditors break the law by illegally collecting discharged debt.
In addition to those problems credit card companies are seeking a “nondischargeability action” in many cases. They are trying to make your credit card debt something that can’t be wiped away. Even after the bankruptcy the “nonchargeable” debt will still need to be paid back. There are two ways banks can get this 1) The application was fraudlent 2) They prove you used the card without an intent to pay. These new rules apply to both chapter 7 and 13 bankruptcy.
There are a number of ‘red flags’ the indicate you didn’t intend on paying the debt back. If any of these happened there is a good chance the judge will rule in favor of the credit card issuer. Most of these rely heavily on the timing of how you used the card and how you proceeded with your bankruptcy.
- New additional credit card debt shortly before filing
- Many new credit cards and applications for more cards
- Pulling out large amounts of cash from your credit cards
- Going on a dream vacation before you filed bankruptcy
- Moving debt from one card to another as a way to make payments
- Going over your credit limit frequently
- Having all your cards maxed out at the time of filing
- You’ve used your credit card after starting the filing process (e.g. paperwork, lawyers, notifications)
If at all possible avoid bankruptcy.