Can I buy a new TV with my credit card before filing for bankruptcy?
Buying a TV before filing for bankruptcy is never a good idea. Here's why.
Making a large, luxury purchase, such as buying a television, on credit in anticipation of filing bankruptcy is considered an act of fraud under federal law, and doing so can get you into trouble. The bankruptcy system is designed to help those who are struggling with debt to free themselves and start over again fresh. With the great benefits that bankruptcy provides, however, the risk of abuse of the system is high, and bankruptcy laws are designed to prevent such abuse.
Buying Luxury Items on Credit Before Filing Bankruptcy
In most cases, when you file for bankruptcy you can wipe out credit card debt. (Learn more about what happens to credit card debt in bankruptcy.) However, in certain circumstances a credit card company might file an action in the bankruptcy court asking the court to not discharge the credit card debt. The court could declare your credit card debt undischargeable if it finds intent to defraud - that is, you borrowed the money under false pretenses.
If you buy luxury items totaling more than $650 with your credit card within 90 days before filing bankruptcy, the bankruptcy court will presume that you did so with intent to abuse the bankruptcy system and get something for nothing. That means that even if you did not know you would be filing bankruptcy when you bought a $750 TV with your credit card, the court will assume you committed fraud. You can present evidence to the contrary to try to convince the court that you did not intend to game the system. (Get more details on what credit card charges are subject to scrutiny in bankruptcy.)
Even if you spend less than $650 and do so more than 90 days before filing your case, you can still face trouble if the credit card company can prove that you knew you were going to file bankruptcy and that you bought the item knowing you would not be paying the debt back. If you buy a $600 flat screen TV a month before bankruptcy, or buy a $1,200 TV 95 days before bankruptcy, you might face an objection from your credit card company. If the court finds in favor of the credit card company, the debt will not be wiped out in your bankruptcy. In certain cases, you could even face criminal investigation by the federal government.
A New TV is Not Worth the Risk
If you pull your credit card out to buy something and you know you're about to file bankruptcy, think about why you're buying it. A new TV is always considered a luxury item under bankruptcy laws, because it's not something you or your children need to survive or to maintain basic quality of life. Using your credit card to buy a TV before filing bankruptcy puts you at risk of having to pay back the debt and coming under scrutiny from the Department of Justice. It simply isn't worth it.
If you're going to file bankruptcy, it's best to stop using your credit cards and only buy what you can afford. Learning good spending habits will help avoid more struggles with debt down the road, and putting the credit cards away before filing bankruptcy will allow you to discharge all your credit card debt without having to fight about it in court. Put the cards away and buy a new TV after your bankruptcy is over and you've saved up enough money to afford it.