Bankruptcy Questions Answered: Can I File Bankruptcy After Running Up Credit Card Debt?

As the holiday season quickly approaches, you’re likely stacking up charges for those once-a-year gifts and services. You could lean toward filing for bankruptcy protection to find relief from rising rates, fees, and non-stop credit card bills. But before you do that, read this–we’re sharing our expert insights. Much like addressing bankruptcy questions surrounding vacations, the discussion comes down to timing.

Bankruptcy in Ohio: Legal Considerations and Timing

A lot of what a court will take into account when you file for chapter 7 bankruptcy or chapter 13 bankruptcy revolves around intent. In fact the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) has specific rules here, stating that a case filed in bad faith could be forced to be dismissed from a chapter 7 or converted to a chapter 11 or chapter 13.

BAPCPA guidelines also prohibit certain types of debt from being discharged, including the following:

• Debt exceeding $500 owed to a single creditor for luxury goods or services and incurred within 90 days of filing
• Cash advances of more than $750 made on a credit card within 90 days of filing

So what does this mean, in practical terms? Put simply, if you’re paying for emergencies or necessities on your credit card(s) and you step back and realize that you won’t be able to repay the debt in a timely manner, or your employment or life circumstances change and you suddenly find yourself without means to repay the debt, the court understands–that’s why bankruptcy exists. 

On the other hand, if it seems that you purposely overspent and racked up massive credit card debt, or worse still, spoke with a bankruptcy attorney before the spending spree, the court will be suspicious of your intent. The same applies if you file for bankruptcy immediately after large debts are incurred. And with good reason. It could appear that you planned to take advantage of or abuse the bankruptcy system, and this could leave you worse off in the end, without recourse but still responsible for repayment.

The latter scenario, the one in which it can look like you’re attempting to play the system, is what courts would refer to as “bad faith.” In a situation like this it’s pretty likely that the Trustee or creditor would challenge your bankruptcy claim. Instead, your goal is to be seen as filing for bankruptcy in Ohio in good faith. This is why timing (and good judgment) are so crucial to your case. Here’s the bottom line: if you’re planning to file for bankruptcy, don't purposely run up debt prior to filing. A better idea is to forgo some discretionary spending and speak with an experienced Ohio bankruptcy lawyer. 

Bankruptcy Concerns: Disclosing Assets

Part of filing for bankruptcy is disclosing assets. This allows the Trustee and the court to know what they’re working with when it comes to repayment of debt. Creditors can also get a reasonable expectation of what they will receive. But if the person filing has a sizable amount of liquid assets, they might try to protect that sum from being part of the bankruptcy proceedings. So prior to filing for bankruptcy, that person might try to hide their assets. If a person has won a lawsuit or inherited money, they might transfer the cash to another individual’s account, claiming that the money is not theirs. This sort of behavior goes beyond just being in bad faith, and could also bring criminal consequences–it’s always best to be upfront and honest when filing for bankruptcy.

Rely on Your Local Ohio Bankruptcy Lawyers

Bankruptcy is a safe way out of a bad situation, but it shouldn’t be central to your future financial plans. And to be on the right side of the law, there’s a lot to take into consideration when you’re filing for bankruptcy in Ohio. Especially if you have large credit card debts you’re hoping to have discharged, it’s important to consult with an experienced bankruptcy attorney. 

James Hausen and his team of expert chapter 7 bankruptcy lawyers at Hausen Law are proud to serve all of Northeast Ohio, including the Akron, Canton, Cleveland, Wooster, Dover/New Philadelphia, and Youngstown communities. Get in touch with us to learn how we can help you get the best outcome from your bankruptcy case.