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

Learn about the risks associated with credit card use before bankruptcy.

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

Yes, you can use a credit card before bankruptcy for food, utilities, rent, and other necessities you can't afford. But, if you've decided to file for bankruptcy or know you're unable to pay for the charges when the bill is due, you'll want to do the following to avoid committing fraud:

  • use credit cards for essential items only
  • avoid charging luxury goods and services, and
  • don't take out cash advances.

This article explains the consequences of using a credit card before filing for bankruptcy. For instance, you'll learn why buying things on credit or taking out cash advances when insolvent and can't pay the bill is considered fraud. You'll also learn about the exception to this rule.

Should I Stop Paying Credit Cards Before Bankruptcy?

It's a good practice to stop using credit cards once you decide to file for bankruptcy. At that moment, you understand you are insolvent and don't have the funds to repay the charges. Buying things on credit, knowing you can't or don't intend to pay the bill, is fraud.

Even so, an exception exists. Keep reading for answers to common questions about credit cards and bankruptcy, including when it's okay to use them before bankruptcy and when you should stop using them altogether.

When Can I Use a Credit Card Before Bankruptcy?

You can always use your credit card to charge basic things you and your family need to survive and maintain your health and welfare. Think necessities, like groceries, diapers, gas to get you to a job interview, emergency repairs to a car or furnace in the winter, and baby food and formula.

But keep good records of your purchases and your financial situation at the time. If someone questions the charges during your bankruptcy case, you'll want to be prepared to prove that you or your family needed the items and didn't have another way to pay.

Can I Max Out My Credit Card Before Filing for Bankruptcy?

It will depend on the circumstances. Many people find themselves financially insecure after relying on credit cards to make ends meet each month. If this fits your situation, you likely maxed out your credit limits long before considering filing for bankruptcy and probably won't run into a problem.

However, you won't want to intentionally max out credit cards without intending to pay the bill—such as after deciding to file for bankruptcy. If the charges don't qualify for a necessity exception, your creditor might view your action of maxing out your cards as a fraudulent act.

Learn about erasing bills you forget to list in your bankruptcy case.

What If I Used My Credit Card Before Filing for Bankruptcy But Didn't Max It Out?

Again, you can use a credit card for items or services you or your family need. For instance, buying food or inexpensive, seasonally appropriate clothing on credit won't run afoul of bankruptcy laws. Paying for necessary utilities or rent also shouldn't be problematic. Again, keep good records showing the things you purchased when funds were tight.

Why Should I Avoid Purchasing Luxury Goods and Getting Cash Advances Shortly Before Bankruptcy?

You won't receive bankruptcy protection if you charge luxury items such as vacations, designer-branded clothing, jewelry, or a new OLED Smart television. And the closer you make such purchases to your bankruptcy filing date, the more problematic the charges will likely be. Here's why.

Suppose you use a credit card to make a luxury purchase within 90 days of filing for bankruptcy or take a cash advance within 70 days of bankruptcy. In that case, the bankruptcy court will presume you committed fraud. The presumption of fraud makes it much easier for a creditor to win a fraud case in which the creditor asks the court to declare the debt "nondischargeable."

When a creditor wins the case, you remain responsible for paying the nondischargeable debt. In other words, you wouldn't be able to erase it in bankruptcy.

How Is a Luxury Purchase Different From a Necessary Purchase?

Anything you don't need will likely be considered a luxury item. For instance, luxury items could include jewelry, dinners out, electronics, furniture, unnecessary clothing and shoes, plane tickets, tickets to sporting events or concerts, and even holiday gifts.

However, the charges must exceed a particular amount before the creditor gets the "presumptive fraud" benefit. The amounts are listed below and change periodically.

What Are the Presumptive Fraud Amounts in Bankruptcy?

If you charge luxury goods totaling more than $800 from a single merchant during the 90 days before filing for bankruptcy, the lender won't need to prove you intended to commit fraud. The bankruptcy court will automatically presume wrongdoing in what's known as a "presumptive fraud" case.

The bankruptcy court will also presume fraud if you take out a cash advance totaling more than $1,100 during the 70 days before filing bankruptcy. The presumptive fraud amounts will adjust on April 1, 2025, and every three years after that.

What Happens If You Commit Presumptive Fraud Before Bankruptcy?

Nothing will happen if the lender doesn't make a presumptive fraud objection. The bankruptcy discharge will erase the charges along with your other qualifying debts.

But suppose the creditor files and wins a bankruptcy lawsuit known as an "adversary complaint." In that case, you'll remain responsible for the charges after your Chapter 7 case closes or pay what you owe in your Chapter 13 plan.

Should I Delay Bankruptcy to Avoid Credit Card Fraud?

If you're considering holding off on your bankruptcy filing until the 90-day presumptive period elapses, it might not help. Timing a bankruptcy filing won't solve every fraud problem. Although a presumptive fraud case is easier to win, a creditor who wants to recover charges made more than 90 days before bankruptcy can file a general fraud case.

The simplest way to avoid both types of fraud is not to use credit when insolvent or 90 days before filing for bankruptcy. However, if you absolutely must, remember an exception for necessary purchases exists.

Can I Pay My Bankruptcy Lawyer With My Credit Card?

No, your bankruptcy lawyer won't allow you to use your credit card to pay legal fees. However, friends and family members can pay your attorneys' fees using their credit cards because the court won't erase the debt in your bankruptcy case. Learn more about how bankruptcy lawyers get paid.

Can I Get Help From a Bankruptcy Attorney?

Most people benefit from retaining a bankruptcy lawyer because it's usually well worth the cost. You'll likely discharge far more in bills than what you'll pay your attorney, and many lawyers offer a free initial consultation.

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

You'll find fillable, downloadable bankruptcy forms on the U.S. Courts bankruptcy form webpage.

Chapters 7 and 13 Bankruptcy Form List

Bankruptcy Document Checklist

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Rebuilding Your Credit After Bankruptcy

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 April 25, 2022

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