Yes, you can charge necessary goods before filing bankruptcy, but luxury purchases can trigger a fraud fight and keep the debt yours to pay.
Using a credit card before bankruptcy won't be a fraudulent act as long as you're charging only for what you actually need, such as groceries, gas, utility bills, and car repairs. What you can’t safely do is run up your credit cards on things you don’t need once you know you intend to file, or when you know you can't and don't intend to repay the bill.
If a credit card company suspects fraud, it can file an “adversary proceeding,” which is a lawsuit filed within your bankruptcy case, asking the court to exclude that debt from your discharge. Below, you’ll find the rules on what counts as fraudulent credit card use, when to stop charging before you file, and how to avoid a “presumptive fraud” challenge.
Can I Use My Credit Card If I’m Planning to File for Bankruptcy?
You can use your credit card for necessary purchases, such as food, clothing, utility bills, and car repairs. However, charging unneeded luxury items on a credit card shortly before filing for bankruptcy can be problematic. For instance, you wouldn’t want to charge a vacation or buy a Gucci purse on credit knowing you can’t pay the bill and plan to file for bankruptcy.
Why You Shouldn’t Max Out Your Credit Cards Before Filing for Bankruptcy
If the credit card company can prove that you used your credit cards fraudulently, the court can rule that the debt is nondischargeable, and you’ll have to pay it back. That’s why it’s essential to know when to stop using credit cards before bankruptcy.
For instance, you commit fraud anytime you use the card when you don’t intend to repay the debt. If the bankruptcy court decides the debt was incurred fraudulently, it will be declared "nondischargeable," and you’ll remain responsible for fully repaying it. (11 U.S.C. § 523(a)(2)(A).)
Learn more about debts you can’t discharge in bankruptcy.
When Should I Stop Using My Credit Cards Before Filing for Bankruptcy?
It’s best to stop charging unnecessary items when you determine you’re insolvent (can’t pay your debts). This usually happens before you decide to file for bankruptcy, but meeting with a bankruptcy lawyer is a clear sign you know you're insolvent.
For example, suppose you visit a bankruptcy attorney and decide to file for Chapter 7. Afterward, you purchase items you don’t necessarily need on credit, intending all along to wipe out the debt in bankruptcy. If you went ahead with lavish credit spending, the credit card company could argue you committed "actual fraud," because you knew you couldn’t pay for the purchase and had no intention to do so.
It’s even easier for a creditor to prove fraud when you charge items during the 90 days before the bankruptcy filing. In this scenario, the fraud is presumed because the charge occurred shortly before filing (discussed below). So, it’s best to stop charging on credit cards when you realize you can’t pay your debts or 90 days before you file, whichever occurs sooner.
What Is Presumptive Fraud on Credit Card Debt in Bankruptcy?
Presumptive fraud lets a credit card company challenge the dischargeability of a debt without proving your intent to defraud. The fraud is assumed based on how much you charged and when. “Presumptive fraud” can arise in two ways:
- you purchase luxury goods within 90 days of filing for bankruptcy totaling more than $900 from one creditor, or
- you take a cash advance within 70 days of filing for bankruptcy totaling more than $1,250 from a single creditor.
You’ll notice that this applies to luxury goods and cash advances. Necessary items and services, such as rent, utilities, food, and modest clothing, aren’t considered luxury goods. So if you use your credit card for food for your family because you have no other way to pay, you won’t run afoul of the presumptive fraud provision. (11 U.S.C. § 523(a)(2)(C)(i)(I); figures are current for cases filed between April 1, 2025, and March 31, 2028.)
What Happens When Credit Card Charges Are Presumed Fraudulent?
The credit card company initiates the challenge by filing a lawsuit, or “adversary proceeding,” in bankruptcy court. If the charges fall within the presumptive 90-day period, the creditor doesn't need to prove you committed fraud. It's automatically assumed. (11 U.S.C. § 523(c)(1).)
Instead, you'd have the burden of demonstrating that the item charged was necessary or that you had the ability to pay for it and intended to do so. If you can't meet the burden, or if the creditor successfully counters your defense, you’ll remain responsible for paying the charges.
How Will the Credit Card Company Fight My Bankruptcy Discharge?
The credit card company will file an adversary proceeding and serve you with it. If you don't respond to the lawsuit, the credit card company will obtain a default judgment against you, and the court won’t discharge the debt. If you do reply, you’ll likely spend thousands in legal fees defending it, and even after paying those fees, you might still lose and have to repay the credit card debt. Because litigation is so expensive, most people facing an adversary proceeding for fraud negotiate to repay the debt, sometimes for less.
Talk to a Bankruptcy Lawyer Before You File
Because qualifying for a discharge can have unexpected hurdles, your safest move is to talk to a bankruptcy attorney before you file, not after you're facing an unexpected fraud lawsuit. An attorney can confirm which of your debts are nondischargeable, whether Chapter 7 or Chapter 13 fits your situation better, and how to handle any debt bankruptcy won’t erase.
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