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Nassar Law blog

How soon can I begin applying for credit cards after filing for bankruptcy?
17 June 2017

I have been approached with this question on a few occasions while serving those within the City of Anaheim. To answer in short:

Credit card debt is normally discharged in bankruptcy regardless of the amount. The discharge wipes out your liability as a debtor. However, if a debtor intentionally incurs liability with the intent of filing bankruptcy on the debt (“fraudulent intent”) or purchases luxury items/cash out advances using credit cards, the court may deem this act as fraud and the debt may be deemed non-dischargeable. Two common forms of misuse are typically seen:

Charging luxury goods or taking out cash advances prior to filing bankruptcy

Often, debtors become entangled in massive credit card debt simply by overspending and/or poor budgeting. In other words, a debtor may not have “fraudulent intent.” However, if a debtor:

  1. incurs large balances on luxury items and services more than $650 (aggregate value) within ninety (90) days of filing, a presumption of fraud occurs; or
  2. makes cash advances totaling $925 or more (aggregate) within 70 days before filing, a presumption of fraud occurs.

Using credit cards while intending to file bankruptcy

This is the most common and most easily alleged occurrence. The act is as simple as the heading. A debtor who uses his/her credit card with the intention of filing bankruptcy on the credit card used has committed fraud.

  1. Credit Card/Lender must allege the fraudulent intention of the debtor
  2. Credit card/lenders typically monitor a debtor’s activity, especially those made prior to filing of bankruptcy. When locating misuse/fraud, the credit card/lender will initiate an “adversary proceeding” in an effort to have the debt deemed fraudulent and thus non-dischargeable. However, unless the credit card/lender company moves to allege credit card fraud through an “adversary proceeding” within the debtor’s bankruptcy, then the debt will be discharged. Again, the creditor must allege fraud via the adversary proceeding.

  3. Overcoming the presumption
  4. To overcome a presumption of fraud, a debtor must provide evidence of:

    1. intention to repay the debt incurred when purchased, and/or
    2. no intention of filing bankruptcy at time of purchase.

It is crucial to select an experienced Bankruptcy Attorney. Anaheim City attorney Gregory E. Nassar is an experienced Bankruptcy Lawyer serving Anaheim City, Whittier, and other cities within Orange County, Riverside County, Los Angeles County, and San Bernardino County. Gregory E. Nassar will review the case, carefully evaluating all a debtor’s purchases and potential pitfalls. The presumption of fraud raised by creditors can apply to any debtor wishing to file bankruptcy (Chapter 7 or Chapter 13) within the City of Anaheim, Orange County.

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