Credit card debt is often dischargeable in bankruptcy, however if you purchase luxury goods or take out cash advances prior to filing, you may run the risk of losing the option to discharge those debts. In some cases a credit card company can file an adversary proceeding within your bankruptcy asking the court to make certain debt nondischargeable.
If you take out a certain amount of cash advances on a credit card within 70 days of declaring bankruptcy, the bankruptcy law presumes the debt to be nondischargeable. If your credit card company files a complaint for nondischargeability, you have the burden to show that you intended to repay the cash advance and did not plan to simply write it off when you declared bankruptcy.
Many people purchase goods or services with their credit cards when they are cash strapped. Some may just keep trying to pay and continue to use the cards until the cards are maxed out, which is about the time they start to consider bankruptcy.
This is not uncommon and credit card companies tend to take a close look at all your cash advances and purchases over the course of the year preceding bankruptcy to determine if your spending behavior was questionable. Purchasing luxury items or services within 90 days of filing for bankruptcy is one of those situations where the credit card company is likely to challenge the dischargeability of the debt.
If you find yourself in a difficult financial situation, the best course of action is to get information regarding what strategies are available to you. Attorney Charles Covey has helped thousands of individuals struggling with difficult debt challenges including significant credit card debt. Contact our Peoria offices today for questions you may have regarding bankruptcy.