Tuesday, July 9, 2019

Quick Tip: Bankruptcy - plan to start using all cash again

When my clients come into my office to talk about bankruptcy, many of them are paying the minimum on their credit cards and then placing all their living costs on the cards. It is a vicious cycle that needs to stop for obvious reasons.

Image courtesy of zdiviv at FreeDigitalPhotos.net
One reason to stop using credit cards is the bankruptcy code. Some charges made close to the time of filing bankruptcy may not be discharged. The bankruptcy code states "consumer debts owed to a single creditor (over a certain amount) ... for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title ... and ... cash advances (over a certain amount) ...  that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable ..." While I find many credit charges do not meet the presumptions defined above, no one wants to chance going through bankruptcy and not have the debt discharged.

Another reason more practical is the cards go away. Once someone files bankruptcy, the cards are gone. If a client is using credit cards, I suggest it is easier to move off the credit cards with a plan than abruptly losing them. I know this sounds easier than it is but it warrants consideration.

For these reasons, people thinking about bankruptcy should consider when they will start paying cash for living expenses and leave the cards behind.

If you want assistance, legal representation, or just want to know more about me, Mark M. Medvesky, or Wells, Hoffman, Holloway & Medvesky LLP, check out our website at www.whhmlaw.com.

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