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Discharging credit card debt in bankruptcy: are there any limits?

| Nov 25, 2015 | Debt Relief |

Holiday season is here. It is a time to slow life down, to appreciate and celebrate the family and friends in our lives. Carefully selecting and giving them the perfect gift is one way to show your gratitude for all they have done to support you. You give them a gift to make their lives brighter.

Unfortunately, times are tough for many families in Lafayette. It has become harder and harder to “make the season bright.” It does not mean that you do not try. The deals retailers offer on Black Friday, Small Business Saturday and Cyber Monday make your dollar go a little further and credit cards can help you delay or extend payments.

Bankruptcy is a powerful tool you can use to eliminate unsecured debt such as outstanding balances on credit cards. Is putting everything on plastic a good idea if you are considering filing?

The bankruptcy court looks at many factors when considering which and how much debt to discharge. Under section 523 of the federal code, the trustee can refuse to discharge debt that looks “suspicious,” like you incurred the debt in anticipation of bankruptcy.

What makes a purchase look suspicious? Where credit cards are concerned, there are two major factors:

  • Timing: Large purchases made within 90 days or cash advances made within 70 days prior to filing.
  • Amount: Purchases on a single credit card of $500 or cash advances of $750. This is the aggregate amount on a single card, not the price tag of a single item or transaction.

Your attorney can advocate for you. Your attorney can help the court understand that you made the purchases to make your family’s life better during the holidays, not that you made excessive purchases knowing that you could discharge them through bankruptcy.

Your attorney can always advocate for you, but you can help. One way to protect your insterests, whether or not you file for bankruptcy, is to plan for your spending. Put together a gift list, research the prices online, find the best deals and set a strict budget. Bring cash to pay for gifts instead of using your credit cards.

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