When a debtor is using credit cards or cash advances to make purchases right before filing for bankruptcy, it can be a red flag to his or her creditors. However, it is important for you to keep in mind that not all recent charges will be non-dischargeable when you file bankruptcy. While the bankruptcy code changes often, the current code says the following:
Purchases of luxury services or goods that cost at least $500 that are made within 90 days of filing for bankruptcy or cash advances that are at least $750 made within 70 days are filing are presumed to not be dischargeable.
What is Presumption?
The presumption that creditors are favored does not arise just because a cash advance or purchase is made within a certain number of days before filing. A presumption is only triggered if the cash advances or purchases are used for luxuries. This means that they were not reasonably necessary for the maintenance and support of the debtor or his or her dependents. Some cases have defined luxuries as being those that are extravagant, nonessential, or indulgent.
For a presumption to occur, the creditor must disclose specific facts in their complaint. If the creditor is too vague, they will be required to carry the burden of proof regarding fraud. This is a much more difficult situation for the creditor, and much more costly.
Any action that is based on fraud, or the intent to deceive or mislead, will be an important element. However, it is hard to prove intent with direct evidence. Unusual credit card usage can create questions about fraud.
Fraud and Non-Dischargeable Debt
For debt to be found non-dischargeable, a creditor must file an adversary proceeding within the bankruptcy. The attorney fees for this action can be expensive, and unfortunately, the creditor often has more money than the debtor, which puts unfair pressure on a debtor to settle the claim.
Fortunately, Congress recognizes that there is a lot of potential for creditor abuse because of the parties’ unequal bargaining powers. This is why the bankruptcy code states that if a creditor files an adversary proceeding and if the debt is discharged, the creditor has to pay the attorney fees of the debtor unless they can prove that filing the suit was substantially justified. However, this requires proof that an investigation was undertaken before the creditor filed the lawsuit. These steps often discourage a creditor from filing a frivolous suit.
Contact an Experienced Georgia Bankruptcy Attorney Today
If you are considering filing bankruptcy in Georgia, you need the assistance of an experienced Georgia bankruptcy attorney. The laws of bankruptcy are constantly changing and are complex and confusing. The attorneys at Lankford & Moore Law know that filing bankruptcy is not an easy decision. We will help you every step of the way and advise you of the best type of bankruptcy for your situation. There may even be options available to you besides bankruptcy. Contact us today to schedule a consultation.