One last splurge on 5th Avenue? A final blow-out at Lord and Taylors or Saks?

Many consumers are tempted to rack up their credit card debt in a last frenzy right before filing for bankruptcy. Seeing as they are going bankrupt anyway, they may see it as a good idea to take their debt to the limit. Some are even persuaded to think that since credit card companies are such financial giants that it only makes sense that the losses they incur from any lack of repayment would be factored in for the companies as acceptable costs of business. They might mistakenly believe that credit card companies write off millions of dollars every year for things just like this. Concluding that since it won’t hurt anyone, it’s probably better to get everything I can now since it will be discharged anyway, and I’ll be losing my future credit card privileges to boot.

Unfortunately for the consumer, bankruptcy does not work this way. The laws were actually created in anticipation of this temptation, and considerable protection is given to creditors in scenarios where credit card purchases of luxury goods or cash advances are made just prior to filing for bankruptcy.

So if you max out your credit cards in Midtown just before filing for bankruptcy don’t expect to be off the hook for the charges.

Running a card up right before filing for bankruptcy may be deemed an abuse by the Bankruptcy Code. The debts may not be discharged. Individual creditors can also object to any large purchases for luxury goods or balance transfers, and for seemingly unnecessary items as well. Basically, charges for luxury items of $550 or more made, in the aggregate, within 90 days of filing are assumed to be non-dischargeable.

Stay away from that Coach handbag you always wanted and the shoes from Prada you think you can’t live without. You will be paying for them in the end.

When credit card statements demonstrate excessive spending with no clear intent to repay the debt, the discharging of the debt could be objected to on the grounds of bad faith. The more time there is between the high credit card use and the filing of the bankruptcy the less inclined a creditor will be to object.

It typically requires extreme credit card use with very large charges over a short period of time with no clear intention to pay the debt back in order to for a creditor to object to the dischargeability of a debt. Responsible, normal credit card spending rarely causes a denial of discharge.

For some consumers who have had unusually high credit card bills in their recent past it may be wise to wait on filing, or better yet work with an experienced attorney to help them plan their bankruptcy. Every case is different, but a good bankruptcy attorney is always needed to understand the best options in New York.

If you live in New York, are considering bankruptcy relief or have questions about how your
recent credit card charges or spending sprees will affect your case, please contact the Law Office of William Waldner. We only practice Bankruptcy Law and are always here to help. We have seen just about every credit card spending situation and can advise on how best to approach your case as well.


Call 212-244-2882 to arrange a free bankruptcy consultation today. Mention this blog post when scheduling by referencing the promotional code: SPR212 to receive a free 3-bureau credit report, and required credit counseling course, both free with any signed retainer agreement.

This article is intended for educational purposes only. By reading this article no attorney-client relationship has been created.