Should I Stop Using Credit Cards If I'm Going to File Bankruptcy?



Generally speaking, yes. It is not mandatory to stop using your credit cards before filing for bankruptcy but you should use them wisely and, ideally, you should stop using them. If charges to your credit cards have been made to purchase luxury items within 180 days prior to you filing the bankruptcy you would need to wait to file.  Examples of luxury items would be charging a vacation, purchasing jewelry, dining at an expensive restaurant, or maxing out a credit card within months before filing bankruptcy.  If a client does make such charges and does not wait to file the bankruptcy the Trustee could exclude the debts from the bankruptcy or make the client pay it all back.  The creditors will most likely suspect fraud if large purchases are made 180 prior to filing.  This also includes cash advances on credit cards as well.

Credit Card Use Before A Bankruptcy

Once a client anticipates that they will have to file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy the best idea would be to stop using your credit cards.  Bankruptcy laws allow the reviews of all questionable purchases for potential fraud.  In the event that you have committed a fraudulent conveyance or misrepresentation on your credit cards, some creditors may try to sue you in bankruptcy court for the remaining balance.  In the event that you do use your credit cards you should only use them for small purchases that are deemed necessities.  Examples are groceries, gas, and other items that are used on a day-to-day basis.

But again, your best bet is to stop using the credit cards as soon as you think bankruptcy will be a possibility.

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