If you pass the means test for Chapter 7 bankruptcy, you will be able to file if you decide to. When you file, your debts will be separated into categories. One category will be debts that are dischargeable, and the other category will be debts that are not dischargeable. Before you file, it will be important for you to know which categories your debts fall into, because this may help you decide whether bankruptcy will be beneficial for you. As you go through this process, your bankruptcy attorney will discuss with you current debts that might be placed in the category of non-dischargeable debts.
Dischargeable Debts Versus Non-Dischargeable Debts
Debts that are dischargeable are those that will be forgiven during a Chapter 7 bankruptcy case. These typically include all unsecure debts, such as medical bills and credit card bills. Other debts are always placed in the category of non-dischargeable debts, and these include debts for child support, alimony, taxes, and lawsuit payments you owe.
What you may not realize, though, is that some debts can fall into one category or the other, including debts that are very fresh and current. There are two main examples of debts that could be excluded from dischargeable debts in your case, and these are:
- Current credit card charges
- Cash advances from credit cards
If you have either of these types of debts that are current, you may end up experiencing problems getting them discharged.
The Rules On Current Charges And Cash Advances
The rules relating to credit card charges in Chapter 7 bankruptcy involve purchases made for luxury goods within 90 days of filing. This typically must be expenditures that are at least $650 or more to a single creditor. If you have multiple charges totaling more than this to different creditors, you should have no problem including these debts in your bankruptcy.
Luxury goods typically means things you do not need. For example, if you purchased food and gas on your credit card, these items would not be labeled as luxury goods. On the other hand, if you went shopping for a new wardrobe and spent over $650 at a store, this could easily be viewed as a luxury purchase.
When it comes to cash advances on credit cards, your creditors may question any advances you took within 70 days of filing for bankruptcy. The amount of the advances must be $925 or more.
If you have current purchases or advances, your lawyer may suggest filing them with your paperwork with all the other accounts you have that are classified as dischargeable. If none of your creditors object to these charges being discharged, the court will most likely allow them to be included in your discharge.
Why These Types Of Debts Matter
The main reason debts like these matter is due to fraud. If the bankruptcy court looks at your information and discovers that you recently made a lot of charges, they might feel like you did this intentionally, with the intention of having these charges discharged through bankruptcy.
Committing acts like this for fraudulent purposes can result in a dismissal of your case, which means you will not receive any relief from the bankruptcy. Bankruptcy courts take the issue of fraud very seriously. If you are planning on filing for bankruptcy in the near future, you should keep this in mind if you are tempted to make purchases with your credit cards for things you really do not need.
If you are struggling financially and need help, you may want to contact a bankruptcy attorney such as Wade Bettis, J.D., Ph.D., PC to learn more about the process.