Sunday, November 13, 2011

Credit Cards in Bankruptcy

      When discussing bankruptcy, many clients often ask about credit cards. Typically, when a debtor is ready to file bankruptcy, they are in such a financial bind that they are living off their credit cards. Credit card debt is dischargeable, but it may be subject to the 90 day rule. The 90 day rule is that it is best to wait 90 days from the last purchase made with a credit card in order to discharge that credit card debt. However, it is not always necessary to wait the 90 days. The Bankruptcy Code states in pertinent part:

Consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable (§523(a)(2)(C)(i)(I))

       What this means is that your credit card debt is not discharged in a Bankruptcy if (1) it is totaling more than $500, (2) to the same creditor, (3) for non necessary purchases (such as food, clothing, bills, etc.), and (4) made within 90 days prior to filing Bankruptcy.

       This protects creditors from debtors who run up credit card debt just before filing bankruptcy, unless that debt was used for food and other necessary essentials.

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