If you find yourself unable to keep up with your debts and don't see many realistic options, you may be considering bankruptcy as a way to obtain relief from your financial problems. However, if you're not careful, you can end up shooting yourself in the foot, so to speak, by opening yourself up to accusations of fraud and abuse.
Credit card companies and other creditors would love nothing more than to keep you from being able to eliminate your debts in Chapter 7 bankruptcy. As a result of they will always be on the lookout for any signs of possible fraud or abuse on your part.
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If you're concerned about the possible accusations of fraud, you should first ask yourself whether you have made a number of charges immediately before your bankruptcy filing. A sudden change in your credit card activities (such as a number of different charges in the same day or much bigger charges than usual) can suggest to the bankruptcy court that you were trying to take advantage and charge as much as possible before declaring bankruptcy.
It is particularly worrisome to a bankruptcy judge if you started making a number of small charges in a single day not long before declaring bankruptcy. This is because small charges would be less likely to be detected by your creditors. Remember, trying to determine fraud (and distinguishing it from mere foolishness) can be difficult, and the court is basically trying to discover your intentions.
If you spoke to a bankruptcy lawyer before making these charges on your credit card, this can also be a concern. The court may believe that you had already decided to declare bankruptcy and should have known better than to charge more items on your credit cards when you had no intention of paying them off.
Of course, this is not set in stone either. Many people speak to a bankruptcy lawyer in order to understand their options more carefully before making a final decision. If you spoke to a bankruptcy lawyer and then made some additional charges on your credit card, that does not automatically mean that you were committing fraud, but it is one more area of concern.
Trying to determine your mindset when you made the charges is difficult, but it plays an important role. For example, if you believed that your finances would improve in the short term (perhaps because you were expecting a new job), then this would not be considered a fraudulent charge because you fully intend to pay off these debts.
Luxury purchases are another big problem, although the definition of a luxury item is open to debate. If you made luxury purchases within 90 days of declaring bankruptcy, and these charges added up to at least $500 to a single creditor, you are presumed to have committed fraud. This means that you now have the burden of proving your innocence by demonstrating that you fully intended to pay for these charges.
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