Credit Card Debt In Chapter 7 Bankruptcy

Credit card companies sometimes challenge the discharge in bankruptcy of debt owed to them, by claiming that the debt was fraudulently charged by:

• Submitting a fraudulent application
• Using the card without any intent to repay the debt

• The length of time between the charges and the bankruptcy filing
• Whether or not an attorney was consulted before you charged the debt
• The number of charges you made
• The amount of the charges
• Your financial condition at the time you charged
• Whether the charges were above your credit limit
• Whether you made multiple charges on the same day
• Whether or not you were employed
• Your employment prospects
• Whether there was a sudden change in your buying habits
• Whether the purchases were luxuries or necessities. Luxury goods over $500 purchased within 90 days of filing cannot be discharged in bankruptcy. Nor can cash advances of more than $750 taken within 70 days of filing.

If you have run up your credit cards in the 2-3 months prior to filing for bankruptcy, it is likely you will have to pay those debts in full.

If you're concerned about a challenge by a credit card company on your credit card debt, you might:

• Wait to file bankruptcy so as to put more time and/or more payments on the account between the questionable usage and filing bankruptcy
• Contest the challenge with evidence that you weren't acting fraudulently at the time your charged on the accounts
• Settle with an objecting creditor if and when they file a challenge
• Convert your Chapter 7 bankruptcy to a Chapter 13 bankruptcy, where you can discharge even debts that may have been fraudulent. In order for these debts NOT to be discharged, creditors must ask the court to make a determination about them. Without a request from the creditor and a granting of that request by the court, these types of debts will be discharged.

Cathy Moran is a business and bankruptcy lawyer in the San Francisco Bay Area, and was one of the first bankruptcy specialists certified by the California State Bar. Her Web site Bankruptcy in Brief includes much information on bankruptcy.

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