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

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

By , Attorney

Yes, you can use a credit card before bankruptcy for food, utilities, rent, and other necessities you can't afford. But to avoid committing "presumptive fraud," you'll want to:

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

In this article, we explain the consequences involved in using a credit card before filing for bankruptcy. You can learn about other things to avoid doing before filing for bankruptcy.

Fraudulent Use of Credit Cards Before Bankruptcy

When you know you won't repay the lender, purchasing an item on credit often amounts to fraud in federal and state courts. But the bankruptcy courts' laws are even more stringent.

If you charge luxury goods totaling more than $800 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.

So what is a luxury item? Anything you don't need, such as jewelry, dinners out, electronics, furniture, unnecessary clothing and shoes, plane tickets, tickets to sporting events or concerts, and even holiday gifts.

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 you'll pay what you owe in your Chapter 13 plan.

Delaying 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 by not using credit when insolvent or filing for bankruptcy. However, if you absolutely must, an exception exists. Keep reading.

When You Can 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. But only if you don't have the money to buy them otherwise. 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. And keep good records of your purchases.

Navigating a Bankruptcy Case

Bankruptcy is an unusual area of law because it's essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because all rules apply in every case, you can't skip a step.

The forms and resources below will help you find more information. Also, you can use this list of Chapter 7 and 13 bankruptcy forms to see where this topic falls. And this handy bankruptcy document checklist will help you gather the things you'll need to complete the petition.

More Bankruptcy Information

Bankruptcy Forms

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

Your Statement of Financial Affairs for Individuals Filing for Bankruptcy

Related Information

Running Up Credit Cards Before Filing Bankruptcy: Is it Fraud?

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

Should I Ignore a Debt Collector's Calls and Letters?

Can I File for Bankruptcy If I Have a Judgment Against Me?

Rebuilding Your Credit After Bankruptcy

Need More Info?

We want to help you find the answers you need. Go to TheBankruptcySite for more easy-to-understand bankruptcy articles, or consider buying a self-help book like The New Bankruptcy by Attorney Cara O'Neill.

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 consulting with a local bankruptcy lawyer.

Updated April 25, 2022

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