Can I use my credit card before I file for bankruptcy?

What happens if you make charges on your credit cards right before bankruptcy? Find out here.

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While you can use your credit cards before filing for bankruptcy, it's usually best to stop using them altogether. Depending on how you use them and what you use them for, you could run the risk of having to repay the debt after your bankruptcy is over. If you use your credit cards for necessities prior to bankruptcy, you'll probably be in the clear. If you use them for items you don't need, you may run into trouble.

Most of the time, credit card debt is wiped out in bankruptcy. However, if you use your credit cards to buy luxury items or other things that aren't necessary for your support or the support of your dependents, the credit card company can ask the court to force you to pay it back.

To learn more about how credit card debt is treated in bankruptcy, see our Credit Cards & Bankruptcy topic.

What Types of Credit Card Charges Can I Make Prior to Bankruptcy?

Your credit card company generally will not fight your bankruptcy if, before filing, you use your credit card only sparingly and only for necessities. Necessities are items you absolutely need -- things like groceries, diapers, gas for your car to go to job interviews, emergency repairs to a furnace in the winter, and baby food and formula. Essentially, necessities are basic things you and your family need to survive and maintain your health and welfare.

What Types of Credit Card Charges Should I Avoid Prior to Filing Bankruptcy?

Luxury items -- things you don't need -- should not be be purchased with your credit cards prior to filing for bankruptcy. Things like jewelry, dinners out, electronics, furniture, unneeded clothing and shoes, plane tickets, tickets to sporting events or concerts, and even holiday gifts are not considered necessities. Cash advances prior to filing bankruptcy are also a big no-no.

Wait to File After Luxury Purchases

If you used your credit card for any of these types of items, it might be best to wait few months before filing without using your card. Federal bankruptcy law presumes that if you buy luxury items and they all add up to more than $650 during the 90-day period before you file bankruptcy, you cannot discharge the debt. Similarly, if you take out cash advances that total more than $925 over the 70-day period before filing bankruptcy, the court will presume that you cannot discharge this debt. That means that if the credit card company fights your bankruptcy and you spent these amounts within the specified time, the court will likely agree and force you to repay the debt.

(To learn more, see Recent Purchases for Luxury Items and Cash Advances: Can You Get Rid of Them in Bankruptcy?)

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