Thinking of Filing Bankruptcy? Think twice before taking on new debt.

If you’re under financial stress, filing for bankruptcy can be a great solution. And amid our current “corona-times” now might be the best moment to file for bankruptcy if you’re seeking financial relief. However, if you’re considering bankruptcy you must be careful in acquiring new debt, or the consequences could be unfortunate. 

Nearly everyone uses credit in their day-to-day lives, whether it is to purchase household items, food, medicine, or virtually any other expense. However, in the weeks or months leading up to your bankruptcy filing, you must be highly selective in where you take on new debt. 

The problem lies in that if you acquire new debt soon before your filing, your creditor may challenge your attempt to discharge the debt by claiming that you are a “Devious Debtor”. This is stated under the U.S. Bankruptcy Code, Section 523(a)(2), and it means that a debtor incurred in new debt without any intention of paying back said debt.

Unless you are racking up debt for necessities of life (such as clothing, food, and medicine), you should stay away from loans altogether. A few obvious things to avoid are luxury items. Luxury items are any services or goods that are not inherently necessary or indispensable for the wellbeing, maintenance, or support of the debtor.

Examples of luxury items are vehicles, sporting goods, vacations, jewelry, expensive or excessive clothing purchases, cosmetics, amongst others. If you use a credit card to purchase any of these items you’re automatically considered to have committed a “presumptive fraud”. 

In addition, if you take out any cash advances of $1000 or more, or that total $1000 within 70 days before your bankruptcy, this will also be presumed fraudulent if taken from any single creditor. Two separate cash advances from different creditors will not automatically be presumed fraudulent. This amount applies to any case filed from April 1, 2019, to March 31, 2022.

You should also avoid opening new credit cards in the weeks before a bankruptcy filing. Your creditor could challenge the reason why you opened the new card and deny your discharge. 

In short, do not take on new debt prior to filing for bankruptcy without speaking with a qualified attorney. If you are considering bankruptcy, we recommend you request a Free Consultation before taking any action.

We, at Adams Law, PA, are dedicated and passionate about helping debtors take control of their finances and get out of debt through a bankruptcy filing. Contact us by phone at (844) 321-6168 or by email at lawyers@richardadamlaw.com to request your free consultation and no-obligation case evaluation.