can we use cards for small purchases before we file

[cantwait]

We've had our first meeting with the attorney. We are in the process of filling out the pre-filing credit counciling. We have not yet missed a cc payment, but the first one we are not making is the 26th of this month. we would like to file at the beginning of June. My question is, if we have used our cards these last couple of weeks for small purchases ( all less than $50) can we still plan on filing in June? We've only used them a few times for Gas and groceries. I didn't think it would mater, but after reading some other posts, I think it might.
Another question - we got a tax return of $6000 in the beginning of March. All but $200 is gone. We owed motherinlaw 2200 so we wrote her a check. We got our van fixed for $800. The accountant was $450 and the rest just went for basic living expenses. We have been struggeling for a long time, but didn't think we would file BK until the beginning of April when my husbands salary got cut $1,200 a month. Any suggestions or comments would be really appreciated Thank-you

[queenfluff]

The general rule is once you talk to an attorney, stop using your cards.

Mine said the rule on cc use is 3 months pre-filing you can't have charged over $1000 on any card (per card I think). And if you did use the card and as long as it is under $1,000 and it is for necessities like gas, you needn't worry about it. Mine was just above $1000 on one card and the rest were OK, but the lawyer said that since the charges were for food and things like that (essentials for living) that it wouldn't stick out as a problem.

What they don't like to see is purchases that were not necessary like buying a brand new big screen at Best Buy or an expensive diamond ring at your local jewelry store. If so, it will stick out as fraud. (like you knew you were going to file for bankruptcy so you went out and bought expensive you didn't really need because you knew you wouldn't have to pay the charges back because you were discharging your debts)

But definatley do not use the cards anymore since you have contacted a lawyer now and are in the planning process. But I wouldn't worry about charges for gas in the past 3 months.


I am not sure about the other issue. But I read someone online (not here) that if the creditors found out you paid MIL instead of them they could come after MIL for the money. Not sure if that is true but I read that it happened to someone once. The van payment should be OK though since you need a car. Ask you lawyer to be sure. Don't leave out stuff like that because questions may arise like "why didn't you use some of the 6K to to pay us (the creditors) back?"


Edited: Just to clarify, the longer you keep using the cards the further you might have to push back your filing. My lawyer waited an extra few days to file mine just to clear a balance transfer even though it probably wouldn't be an issue. But really, stop using the cards altogether. The cards will be gone soon and might as well get used to not using them now. If you use them, after you talk to the lawyer, the cc companies may site you for fraud because you still used them even though you knew you were doing the bankruptcy. Even if it was small charges - no matter what it was (you have to keep that 3 month rule thing in mind)

[StartingOver08]

Ok, you have two issues:

1) you can not charge on the credit cards within 90 days of filing. If you have already charged on your cards, small purchases even, do NOT file until you have 90 days with no charges. You are taking a risk by continuing to charge on your cards. You risk either a conversion to a Ch 13, or the recent charges would not be dischargeable, or what is worse, an outright dismissal of your case. In a dismissal, you would still owe all the debt.

2) You have a $2200 payment to an insider, the look back period for insider payments is one year. The Trustee can go after your mother-in-law to recover the $2200 to give to creditors. Plus, the Trustee can look back the whole year and see if you have made other payments to insiders and go after those payments too.

The 'luxury items' issue that Queenfluff presents is another issue altogether - the threshold for luxury items is $500. And luxury is really more like non essential items rather than luxury.

I certainly would wait to file unless your mother in law has no problem in giving up the
$2200 to the Trustee now.

[TEW]

We've had our first meeting with the attorney. We are in the process of filling out the pre-filing credit counciling. We have not yet missed a cc payment, but the first one we are not making is the 26th of this month. we would like to file at the beginning of June. My question is, if we have used our cards these last couple of weeks for small purchases ( all less than $50) can we still plan on filing in June? We've only used them a few times for Gas and groceries. I didn't think it would mater, but after reading some other posts, I think it might.
Another question - we got a tax return of $6000 in the beginning of March. All but $200 is gone. We owed motherinlaw 2200 so we wrote her a check. We got our van fixed for $800. The accountant was $450 and the rest just went for basic living expenses. We have been struggeling for a long time, but didn't think we would file BK until the beginning of April when my husbands salary got cut $1,200 a month. Any suggestions or comments would be really appreciated Thank-you

The 2200 is the problem.. That is a preferential payment The trustee can take that back from your MIL. anything more then 600 90 days before filing on non secured credit is a preferential payment to make it worse she is an insider. they can look back 2 years on that.

[downsized]

We talked to our atty last week. I told him that the day before my dh lost his job, I charged a couple of hundred dollars worth of continueing education classes. Before that, we hadn't charged on the cards since Christmas. He said not to worry about it as that charge would be deemed a necessary expense. I have to take cont. ed classes for my job. He said we'd be ok to file whenever we want. We're filing next week which is only on month after that charge.

[StartingOver08]

Call your attorney and tell him about the recent $2200 payment to your mother in law. It is better that the attorney knows all the info up front so you are best prepared to make it thru your bk with the best possible result - a discharge.

[chad9162]

I wouldn't believe all the doom and gloom about the 90 day thing. I agree that you shouldn't go on a shopping spree but only your attorney knows what you should do. So CALL YOUR ATTORNEY! Since all districts treat certain things differently your attorney is going to know what's best. My attorney did not care about a charge for $220 within 90 days.....and it wasn't for necessities. It wasn't fraudulent either. As for the preferential payment that could be a problem. My attorney said the trustee gets to collect fees on the money they "recover" but like most things it can be negotiated.

[cantwait]

Thank you for all the replies. I actually did mention the payment we made to my mother in law to the attorney, she said it shouldn't be a problem. I'm just trying to double check advice. We haven't used the cards since talking to the attorney. We just had our appointment April 15th. We only realized we would have to file BK April 9 when my husband was informed his pay was being cut by 1,200 a month. I don't think I could wait a year to file. Truthfully, I think it will start getting harder to file because there is going to be an influx of filers. Although I am praying everything goes smoothly and will be happy to be out from under credit card debt - we'll be in about the same pickle we are now. Our credit card payments are about $1200/mth and my husband got a $1200 month cut. The difference being now that when we do have an increase in pay (he works on commission as well) we won't be using the extra to pay the cards. Anyway, thank-you to everyone who answers all these post on here. This is such a helpful site.

[fltoo]

The few charges before filing for necessities are not a problem.

If your attorney says that the 2200. payment, which IS a preferential insider payment and has a look back of ONE YEAR, is not a problem, I would consult with another attorney.

There is a thread on here where an attorney told someone a payment to the MIL was not a problem and the trustee is giving the debtor a problem with it.

The trustee might consider some kind of deal instead of going after your MIL or you can wait the year out before filing.

[Flamingo]

We talked to our atty last week. I told him that the day before my dh lost his job, I charged a couple of hundred dollars worth of continueing education classes. Before that, we hadn't charged on the cards since Christmas. He said not to worry about it as that charge would be deemed a necessary expense. I have to take cont. ed classes for my job. He said we'd be ok to file whenever we want. We're filing next week which is only on month after that charge.

Does your employer reimburse you for those continuing education classes that you state you "have to take" for your job? If so, advise your attorney because reimbursed expenses show up on pay stubs and yearly W-2's. That would be money you are discharging in BK and possibly being reimbursed. Not a good thing.

[catleg]

I would take the lawyer's advice with a grain of salt. That payment to MIL is definitely at risk. Now, the lawyer might know your local trustee and know better about this than all of us on the message board. But I would definitely ask the lawyer to explain his reasoning on that topic. Because by the letter of the law that money should be clawed back for creditors (think Bernie Madoff here).

In the long run it probably doesn't matter that much because it's out of your control for the most part, and with a ch7 the sooner you file the sooner you stop paying the credit cards, so there is no reason to drag this out a year, if the payment was for 22k or 220k it might be another story however.

As for the cards, small purchases shouldn't raise an outrcy. You've been making payments, they can't show fraudulent intent.

In general the trustee is looking for assets to liquidate for creditors, the creditors are responsible for objecting to debts as non dischargeable, but this requires them to spend money on an adversarial proceeding (i.e. pay lawyers) so it's really unlikely .