Clients always ask me the following question “Can I go max out my credit cards and then come back and file for bankruptcy?”  The answer to that question is NO and it could lead to severe consequences including having the credit card companies sue you while you are in bankruptcy, and if they win the debt incurred will survive bankruptcy.

What do the credit card companies look for?

When you file your bankruptcy each credit card company, that you owed money to, will look back 90 days to determine whether or not you made charges on their card during that period.  Credit cards will look at the charges and determine if any of the charges are considered luxury goods.  A good rule of thumb is that anything other than food and gas is probably going to be considered a luxury good.  The credit card companies can sue you on anything they deem a luxury good. 

What do the courts look at to see if the debtor intended to defraud the creditor?

This is a non-exclusive list of factors that the court may use to determine whether or not the debtor, while using their credit card within the 90 day period before bankruptcy, intended to defraud the credit card.

  1. 1.      The length of time between the charges made and the filing of bankruptcy
  2. 2.      Whether or not an attorney has been consulted concerning the filing of bankruptcy before the charges were made
  3. 3.      The number of charges made
  4. 4.      The amount of the charges
  5. 5.      The financial condition of the debtor at the time of the charges
  6. 6.      Whether the charges were above the credit limit of the account
  7. 7.      Whether the debtor made multiple charges on the same day
  8. 8.      Whether or not the debtor was employed
  9. 9.      The debtor’s prospects for employment
  10. 10.   Financial sophistication of the debtor
  11. 11.   Whether there was a sudden change in the debtor’s buying habits; and
  12. 12.   Whether the purchases were made for luxuries or necessities

If you are thinking of filing for bankruptcy in the greater Fort Lauderdale-Miami area and would like to speak with a local bankruptcy attorney then please contact Ofer Shmucher at Shmucher Law, PL by calling 305.741.5553 or 954.309.5559.  We offer free consultations in our main Miami office as well as our satellite offices (by appointment) including Boca Raton, Fort Lauderdale, Plantation, and Sunrise Florida.