Here is the situation: you are ready to file for bankruptcy, but you see you still have room on a few credit cards before they reach their limit. You think to yourself, “If they are just going to wipe out all my debt, then what’s the big deal with charging them to the max now?” It may be an inevitable to think that way, however, the bankruptcy courts are well aware of this practice are already wise to these sorts of plans.
When the court views your spending habits prior to filing for bankruptcy, they can plainly see any shopping-spree you were on. It would be very easy for the court to determine you had no intention to pay back the debt on those items. Most likely, you will still be held responsible to pay off that debt even if the bankruptcy goes through. Worst case scenario, the court may see this as fraud and decide to deny your bankruptcy request altogether.
The people who file for bankruptcy have a specific reason for choosing that course of action. Most of the people who file for Chapter 7 do so for the following reasons:
- Their income has fallen to a level where they are unable to support themselves or their family. Credit cards are then used for essential purchases such as food, fuel, etc. When minimum credit card payments cannot be met, higher interest is added on and the problem gets worse.
- Loss of job. Even when a spouse loses a job it can have a dramatic effect on finances.
- Unable to keep up with the mortgage payment and hope to avoid foreclosure.
- A medical emergency. This can be from mounting bills or the inability to work due to a health-related problem.
Bankruptcy is not a solution for credit card abuse. People who file for bankruptcy are usually hardworking individuals trying to do the right things before financial trouble overwhelmed them. If you use credit dishonestly prior to a bankruptcy, it could leave you in the same predicament with no meaningful option to relieve your debt.