How long before filing for bankruptcy are you supposed to stop using credit cards?

By , Attorney · University of the Pacific McGeorge School of Law

Question: Should I Stop Using My Credit Cards Before Bankruptcy?

I recently lost my job and can't pay my outstanding debts, so I'm considering filing for bankruptcy. My problem is that I can hardly cover my daily expenses without using my credit cards.

How soon before bankruptcy do I have to stop using my credit cards? Also, when should I stop paying my credit card bills?

When to Stop Using Credit Cards Before Filing Chapter 7

You'll want to stop credit card use as soon as you realize that you can't pay for your purchases and certainly as soon as you decide to file for bankruptcy. But before explaining why, you should know that an exception exists: You can use a credit card for life necessities, food, a winter coat, heating oil or propane, or needed car repairs, for instance, before filing for bankruptcy.

However, if you need to rely on this exception, keep good records of your expenditures so you're prepared if a creditor questions your purchases. Now for the general rule.

Why You Should Stop Using Credit Cards Before Bankruptcy

When you file for Chapter 7 bankruptcy (the chapter usually filed after a job loss), your creditor will examine your recent financial transactions looking for signs of fraud. In this context, fraud means that you ran up bills with no intent to repay them, either because you knew you were going to file for bankruptcy or lacked the financial ability to make good on the charges. Here's how it works.

Suppose you run up more than $800 to a single creditor for luxury goods or services within 90 days before you file for bankruptcy (for cases filed between April 1, 2022, and March 31, 2025). Luxury goods, like expensive shoes, video games, or vacations, aren't things you need for everyday life.

In that case, the law will automatically presume you had fraudulent intent when making the purchase.

You Can Use Credit Cards for Things You Need Before Bankruptcy

Necessary goods and services, such as rent, utilities, and food, aren't included in the presumptive fraud amounts. However, the presumptive fraud rule applies to cash advances of more than $1,100 from a single creditor during the 70 days before filing for bankruptcy (for cases filed between April 1, 2022, and March 31, 2025).

How Credit Card Companies Object to Bankruptcy Discharges

In either presumptive fraud instance, if the creditor objects and files an "adversary proceeding" or lawsuit during your bankruptcy case, you will have to prove that you didn't commit fraud, or the charges will survive your bankruptcy.

Even if your actions don't fit neatly into either of these categories, a creditor can circumvent the presumptive rule by proving you committed fraud when you made the purchase, regardless of when the purchase occurred.

Here are some of the acts a creditor might present as evidence proving a lack of intent to pay for charged goods or services:

  • running up charges shortly before filing
  • continuing to use the card after receiving past due notices
  • increasing spending in the months before filing
  • continuing to use the card after deciding to file (for example, after meeting with a bankruptcy attorney), or
  • using the card in a way that circumvents the spending limit (for example, by making multiple charges for smaller amounts that don't have to be precleared by the merchant).

If the creditor is successful, you'll remain responsible for the debt. Of course, defending lawsuits is costly, so most debtors agree to repay the debt right away, sometimes at a reduced amount.

Because of these rules, the safest course of action is to avoid luxury charges or cash advances that exceed the limits during the months before filing or as soon as you decide to file for bankruptcy, whichever comes first.

Learn more about credit cards in bankruptcy and debts that aren't dischargeable in bankruptcy. Or read more about running up credit cards before filing for bankruptcy.

When to Stop Paying Credit Cards Before Bankruptcy

Credit card balances are debts filers regularly erase or "discharge" in bankruptcy, so you won't want to pay anything more toward them than necessary. A good rule of thumb is to continue paying credit card balances until your bankruptcy lawyer verifies that you qualify for bankruptcy. Also, be sure you can pay the attorneys' fees and comply with other filing requirements.

The most significant risk of stopping credit card payments too soon is that if you learn you don't qualify later, you could find catching up on the back payments, late fees, and other costs challenging.

Navigating Your Bankruptcy Case

Bankruptcy is essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because the rules apply to every case, you can't skip a step. We want to help.

Below is the bankruptcy form for this topic and other resources we think you'll enjoy. For more easy-to-understand articles, go to TheBankruptcySite.

More Bankruptcy Information

Bankruptcy Forms and Document Checklist

Schedule E/F: Creditors Who Have Unsecured Claims

Chapter 7 and 13 Bankruptcy Forms

Chapter 7 Bankruptcy Document Checklist

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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

Updated: September 14, 2022

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