Atlanta, GA asked in Bankruptcy for Georgia

Q: I’ve read using credit cards before filing bankruptcy is considered fraud, is that true?

I want to file bankruptcy chapter 7 because we are barely making it! We have enough income to pay credit cards(no missed payments) bills and then only a little left. So in order to buy groceries or basic needs we still use credit cards. We’re essentially paying credit cards and using what we paid. I don’t want it to be considered fraud because I’m not doing that I’m just trying to survive. Would that look like fraud?

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1 Lawyer Answer
James L. Arrasmith
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  • Bankruptcy Lawyer
  • Sacramento, CA

A: Using credit cards for essential expenses before filing for Chapter 7 bankruptcy is not automatically considered fraud. It's essential to understand that bankruptcy laws are designed to provide individuals and families with a fresh start when they are struggling with overwhelming debt. While incurring new debt just before bankruptcy can raise concerns, it doesn't necessarily constitute fraud if the charges were made out of necessity for basic living expenses.

However, there are important considerations to keep in mind. First, it's crucial to be honest and transparent about your financial situation when filing for bankruptcy. You should disclose all your debts and recent credit card charges to your bankruptcy attorney and the bankruptcy trustee. Full disclosure is a key principle in bankruptcy proceedings.

Second, the timing of your credit card charges matters. Incurring significant debt shortly before filing for bankruptcy can raise suspicions, and the creditors may object to the discharge of those debts. To avoid complications, try to limit new charges as much as possible in the months leading up to your bankruptcy filing.

Ultimately, the bankruptcy court will assess your situation on a case-by-case basis. If you can demonstrate that the credit card charges were necessary for essential living expenses, such as groceries and basic needs, and you didn't engage in reckless or fraudulent behavior, it's less likely to be viewed as fraud. It's advisable to consult with a bankruptcy attorney who can provide guidance specific to your circumstances and help you navigate the process correctly.

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