✅ Can I Use My Credit Cards Right Before Filing Bankruptcy? (What You MUST Know)

⚖️ Important Preface: Why Credit Card Objections Are Extremely Rare

It’s extremely rare for credit card companies to object to the dischargeability of a debt in bankruptcy. Unless you’ve done something extreme—like spending $70,000 the month of filing—they’re unlikely to take action.

Why? Because in order to keep that debt from being discharged, a creditor must file an adversary proceeding, a lawsuit within your bankruptcy case. These cases are very expensive, often starting at $15,000 in legal fees. As a result, creditors typically pursue this only for substantial, clear-cut cases of fraud.

🏛️ What the Law Says About the Advice I Can Give You

In Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. 229 (2010), the U.S. Supreme Court ruled that bankruptcy attorneys cannot advise clients to incur new debt with the intention of discharging it in bankruptcy. In other words, I cannot—and will not—suggest you charge your cards knowing you plan to file.

However, if you incurred credit card debt before even considering bankruptcy, those charges are generally not a problem, unless they were made in bad faith or too close to your filing date.

🧾 What Are Considered Luxury Goods or Services?

The Bankruptcy Code draws a clear line between necessary expenses and luxury items:

Considered Necessary Considered Luxury
Groceries Jewelry
Gas and auto repairs Vacations
Utility bills High-end electronics
Medical bills Designer clothing
Rent Hotel stays or fine dining

If you spend more than $900 on luxury goods or services within 90 days of filing, the law presumes those debts were incurred fraudulently. That doesn’t mean they’ll automatically be excluded from discharge, but you may need to prove they weren’t made in bad faith.

Likewise, cash advances totaling more than $1,250 within 70 days before filing also fall under this presumption.

❗ But What If It’s Not a Luxury Item?

Even necessities could hypothetically be challenged. For example, if a creditor could prove you bought groceries on your credit card with no intent to pay it back, they might object to dischargeability.

However, I’ve never seen such a case actually proceed as of the date of this article(7/11/2025). Credit card companies have bigger targets, and it’s unlikely they’ll spend $15,000+ in legal fees chasing down a few hundred dollars unless there’s obvious fraud.

⏱️ Key Look-Back Periods & Legal Presumptions

Transaction Type Look-Back Period Threshold Amount Legal Presumption
Luxury Purchases 90 days $900 Presumed non-dischargeable
Cash Advances 70 days $1,250 Presumed non-dischargeable

These rules stem from Bankruptcy Code § 523(a)(2)(C) and are accurate through March 31, 2028.

🛡️ “Presumed” Doesn’t Mean “Automatic”

When a debt is presumed non-dischargeable, it means the burden shifts to you to show:

  • You intended to repay the debt.

  • You weren’t planning to file bankruptcy at the time.

  • The credit card purchase before bankruptcy wasn’t luxury or wasn’t over the threshold.

But here’s the thing: unless the creditor files an adversary proceeding—which they usually don’t—the debt will be discharged anyway.

🙋 Frequently Asked Questions (FAQs)

1. Can creditors object to grocery purchases too?
Hypothetically yes, but it’s extremely rare. They’d need to prove bad faith or fraudulent intent.

2. What happens if I go over the $900 limit on luxury goods?
It triggers a legal presumption, but you can rebut it with evidence of honest intent.

3. Are all electronics considered luxury?
Not necessarily—items like a basic laptop for school or work may be defendable as necessities.

4. Can I avoid issues by waiting to file?
Yes. Delaying past the 70- or 90-day thresholds can help eliminate the presumption of fraud.

5. Do creditors file adversary proceedings often?
Not at all. They’re expensive and usually only pursued for large, obvious cases of abuse.

6. What if I charged $1,200 in cash advances last month?
That could be presumed fraudulent. Talk to your attorney about waiting to file or explaining your intent.

🧠 Bottom Line

  • Don’t incur new debt once you even think about filing for bankruptcy.

  • Avoid luxury purchases and cash advances in the weeks leading up to your filing.

  • Keep receipts and notes to show your honest intentions if needed.

  • The law is strict, but enforcement is rare unless serious fraud is involved.

  • If in doubt, ask your attorney—don’t guess

 

📞 Have questions about your specific situation? Call/Text my office at William Waldner PC at 212-244-2882 for experienced bankruptcy guidance.  You can also email me at info@midtownbankruptcy.com

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