When Should You Stop Using Your Credit Cards?
Transcript:
Matt: Hi, Matt McArthur, Clear Counsel Law Group. Question that I was just recently provided was, if I'm thinking about filing or planning on filing for bankruptcy when is it advisable to stop using my credit cards? My first instinct is to respond immediately. If you know you're going to file for bankruptcy, you shouldn't be getting yourself deeper into the hole. Continuing to use your credit cards when you know that you are planning on filing for bankruptcy can be what we call bad faith. By bad faith it simply means that you know you're going to file bankruptcy and you have no intention of repaying this debt. It's essentially unfair, unjust, morally wrong to continue to rack up the bill on these credit cards when the credit card company has no idea that you are filing bankruptcy, but you do. It puts the lender, the people that are making these purchases on your behalf in essence, at an unfair disadvantage.
With that being said, generally speaking, if you have used credit cards recently but you've only recently decided to file for bankruptcy because you've taken a hard look at your financial situation and come to the realization that you're not going to be able to repay the debt, that doesn't mean you can't file for bankruptcy sooner than later. It just essentially goes to what your intent is. If you had the true, honest intent to repay these debts at the time you made the purchases you should be all right. Definitely the best advice I can give is if you know you're thinking of filing bankruptcy stop using the credit cards immediately.
Follow-up question?
Brian: Yes. Will a judge or any other legal entity question your intent during the bankruptcy proceeding?
Matt: Not usually. Not unless there's a credit card company that, for some reason, has reason to believe that you were acting in bad faith. For example, if you were making large credit card purchases up to the week before you filed for bankruptcy that looks pretty suspicious, and it's possible that the credit card company could get involved in your bankruptcy case on a more detailed level where they file documents, motions, requests of the court to take a closer look at your situation. There's a number of ways they could get involved in your case, anything from appearing at the meeting of creditors to filing an adversary proceeding and asking that the debt not be wiped out.
That's why the best rule of thumb is if you actually know that you're going to file for bankruptcy, don't incur any more debt. It's dishonest and it's acting in bad faith. It can only cause problems in your bankruptcy case. If you're at all concerned about recent credit card uses and you're thinking about filing for bankruptcy, please come in and see me. I'll talk to you about the situation and I would give you a good expectation of what I would foresee happening in your case. We can give you all of the information you need to make the best decision possible for you. I hope to see you soon.
