Going on a spending spree before filing for bankruptcy may be tempting, but you must refrain from doing so. Maxing out your credit cards and creating debt you don’t intend to repay can prevent a discharge in your bankruptcy case and may lead to more serious legal consequences.
The safest thing to do is consult with a bankruptcy lawyer to learn more about how using credit cards during this time could affect your unique legal situation. Only an experienced bankruptcy lawyer can provide the guidance you need to understand the bankruptcy process and your risk exposure.
The Court May Consider Your Debt Fraudulent Spending
Maxing out credit cards before filing for bankruptcy can be considered fraudulent behavior under the law. The court views this action as an attempt to take on debt without the intention or ability to repay it. If the court finds that you've engaged in fraudulent behavior, your bankruptcy discharge could be denied, meaning you would remain liable for the debt.
Additionally, creditors may object to your bankruptcy filing if they believe you've maxed out your credit cards with the intent of having the debt discharged. They can file a lawsuit against you, known as an adversary proceeding, to challenge the discharge of the debt. This could result in a lengthy legal battle and further financial stress.
The court may also investigate the timing of your credit card charges. These transactions may be presumed fraudulent if you made significant purchases or cash advances within 90 days of filing for bankruptcy. This could lead to the denial of your bankruptcy discharge for those specific debts, leaving you responsible for repaying them.
Other Consequences of Fraudulent Behavior
A case dismissal isn’t the only potential consequence of bankruptcy fraud. If the court determines that you've committed fraud, you could lose the protection that bankruptcy offers. This would leave you liable for all your debts, with creditors free to pursue collection actions against you.
Fraudulent behavior can also result in criminal charges. Bankruptcy fraud is a federal offense, and if convicted, you could face fines, imprisonment, or both. Even if criminal charges are not pursued, being accused of fraud can damage your reputation and make it more difficult to obtain credit or financial services in the future.
It's also important to consider the emotional and psychological toll of being accused of fraud. The stress and anxiety of legal battles and financial uncertainty can affect your well-being and relationships. Avoiding fraudulent behavior and following legal guidelines can help you navigate the bankruptcy process more smoothly.
Seek Legal Guidance
Before making any decisions about your finances, consult with a bankruptcy attorney. An attorney can review your situation, explain your options, and help you avoid actions that could jeopardize your bankruptcy case. Legal advice is especially important if you're considering filing for Chapter 7 or Chapter 13 bankruptcy, as the rules and procedures for these types of bankruptcy differ significantly.
An attorney can also help you understand the implications of your financial behavior leading up to the bankruptcy filing. They can advise you on how to avoid fraudulent behavior and ensure that your case proceeds smoothly. Additionally, an attorney can represent you in court and protect your rights throughout the bankruptcy process.
If you're struggling with debt and considering bankruptcy, don't wait until the situation becomes dire. Seek legal advice early to explore your options and develop a plan that minimizes financial and legal risks.
Contact Us for Help with Bankruptcy
Maxing out credit cards before filing for bankruptcy is a risky behavior that could be your biggest financial mistake. When you need legal guidance to help you reduce your exposure to such risks, Buchalter & Pelphrey is here to help. With many years of experience helping others navigate bankruptcy, we have what it takes to help you seek debt relief.
Learn more about how Buchalter & Pelphrey can make a difference for you during an initial consultation.