That whole 90 day Credit Card Thing :)

[BrokeInCali]

So I realized at the end of February that I may have to file bankruptcy because I couldn't keep thinking "Business will pick up, things will get better" and face reality.

I continued to use my credit cards for gas, groceries and utilities until I realized that yes I would have to file. My last charge was an auto-payment to my phone company on 4/5 and my auto-pay to Netflix for $10 at the end of March.

I was also using my business cards (I have an S-Corp that I will be dissolving) for regular business expenses.

I have now went though and changed all auto-pays to my new checking accounts (had to get new bank accounts away from where the credit cards are)

When I spoke with my lawyer during my free consultation, I asked if I needed to wait 60 or 90 days to file because of my recent charges. He said it wasn't a problem at all and I didn't need to wait.

Why does everyone state that it is a good idea to not have charges for 60-90 days? Is if to avoid presumption of abuse? For those that have gone through the process, did you have any recent charges? Were they looked at carefully?

[BAR]

I had done the same thing just charged small items needed for survival, and the trustee never even mentioned it at all. My lawyer didnt either. I filed and had charged things the few weeks before filing. I think what they are looking for is large purchases just before filing, which ends up being regarded as abuse.

[debee]

Why does everyone state that it is a good idea to not have charges for 60-90 days? Is if to avoid presumption of abuse? For those that have gone through the process, did you have any recent charges? Were they looked at carefully?

It's because of section 523 of the bankruptcy code which states: "consumer debts owed to a single creditor and aggregating more than $550 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable;"

Same thing for cash advances except the lookback is 70 days & the limit is $825.

For these kinds of charges the creditor wouldn't have to prove anything. It's autopilot nondischargeable. For charges outside this time/amount range, or consumer good category, the creditor has to prove that the debtor had no intention to repay, etc. and if the creditor launches an AP, then the debtor has to pay the lawyer to defend against it. The easiest way to avoid an autopilot nondischargeable ruling and/or the likelihood of a creditor AP is to stop using the cards for as long as possible before filing. (Note: depending on card use & payment history, this could mean 6 months or a year or longer)

Having said that, I've read posts on this board written by people who did use their cards (for simple necessities) prior to filing, but not after consulting an attorney, and they discharged just fine. I would trust your lawyer.

Link to 11 USC 523(Note: dollar values are outdated): http://www.law.cornell.edu/uscode/us...3----000-.html

[AngelinaCatHub]

So I realized at the end of February that I may have to file bankruptcy because I couldn't keep thinking "Business will pick up, things will get better" and face reality.

I continued to use my credit cards for gas, groceries and utilities until I realized that yes I would have to file. My last charge was an auto-payment to my phone company on 4/5 and my auto-pay to Netflix for $10 at the end of March.

I was also using my business cards (I have an S-Corp that I will be dissolving) for regular business expenses.

I have now went though and changed all auto-pays to my new checking accounts (had to get new bank accounts away from where the credit cards are)

When I spoke with my lawyer during my free consultation, I asked if I needed to wait 60 or 90 days to file because of my recent charges. He said it wasn't a problem at all and I didn't need to wait.

Why does everyone state that it is a good idea to not have charges for 60-90 days? Is if to avoid presumption of abuse? For those that have gone through the process, did you have any recent charges? Were they looked at carefully?

YES. and 'debee' is correct. I must add, even using the credit cards for essentials WHILE you know ahead of time that you are going to bk "could" be considered fraud. That is why as 'debee' advised, that your current charges will not be discharged in bankruptcy. It may also bring even so minor, a complaint against your bk. Remember, you have 60 days after you 341 and if the bank getting your "suggestion of bankruptcy" figures out that you have been using them knowing you are bk, they could cause you trouble. Better to be safe. 'Hub

[BrokeInCali]

So, in certain cases, the credit card company could get the charges from 90 days non-dischargeable, but not the whole debt, right? In the last 90 days I have $740 of non-luxury items charged on my card. If I have to pay that I am fine with it, rather than waiting to file.

[debee]

... not the whole debt, right?

Right. Not the whole debt.

[ScaredINMich]

We used ours for small items up until we made our final decision (about 3 weeks before we filed) with no issues.

[Jacey]

I had a few small charges on things that I forgot (iTunes...kids kept buying music apparently) and I was really worried. So far, no problems because of it. I knew that the risk of me waiting to file with income changing was very small. My attorney didn't want to wait at all, but I told him I wanted to wait at least 60 days. I figured if I had to pay back the charges after that point it would be very small compared to the debt I was hopefully getting rid of.

[btbeme]

In the twisted crazy-straw logic of the BK world, using your credit cards for "necessary expenses" just prior to filing is actually WORSE than using them for other purposes, for the reasons brought up above - you KNEW you had to use them but could not repay the debt.

The 90 day timeline helps to insulate you but is not the Impenetrable Shield of Fraud Protection. That being said, most knowledgable attorneys know and understand what will and will not fly with the local Trustees. If we are talking thousands of dollars, I'd watch out. If in the hundreds of dollars, it probably isn't worth a Trustee's time or effort to pursue...unless, of course, there are a lot of red flags in the filing otherwise.

One way to check your attorney's advice is to check with a couple other attorneys. Most give a free initial consultation - try a couple more to see if their song is the same.