Debtors With New Credit Cards Prior to Filing Must Use Them With Caution Says Iowa Bankruptcy Lawyer

Law Firm Newswire



Des Moines, IA (Law Firm Newswire) April 25, 2012 – New credit cards are tempting to use before filing for bankruptcy. This is not a wise plan.

If an individual is facing a bankruptcy, and also received a new credit card, the temptation exists to go ahead and use the card before filing a petition. This is not a wise move, indicated Iowa bankruptcy lawyer Kevin Ahrenholz. If the card is used just prior to filing, this may send a clear signal to the courts that the debtor is attempting to defraud the system, particularly if large items were bought. Typically speaking, the more current the charges to a credit card before filing for bankruptcy, the closer the examination of the filing in total.

On the other hand, should an individual use a new credit card, and only makes small purchances, this will likely not affect the bankruptcy case, noted Ahrenholz. What the courts tend to scrutinize is the nature of the items purchased, the price, the timing of the purchases and when a person filed for bankruptcy protection. If the court feels a debtor is trying to take advantage of the system by deliberately running up a credit card bill that may be discharged in bankruptcy, there are instances when a petition has been denied, and the debtor charged with attempting to defraud the courts.

Generally speaking, according to current bankruptcy law, credit card purchases for luxury goods over $600 within a three months time frame of filing for bankruptcy protention are not discharged. In other words, the person who charged the goods will still have to pay for them. Additionally, cash advances over $875 within 70 days of filing are exempt from discharge. If there are any questions about using a new credit card, they need to be covered by discussing bankruptcy law with an experience Iowa bankruptcy lawyer.

It is important to remember that any credit card company may go ahead and file an adversary proceeding against a debtor in which they dispute the right to have the debt discharged. The courts take a look at the action, paying close attention to recent purchases, to see if they are eligible to be discharged. If not, the debt will not be discharged, leaving the debtor on the hook for the money owed. However, the company may also want to file fraud charges if they feel they can demonstrate a debtor lied about their income or got the card just to rack up purchases before filing bankruptcy.

When in doubt about what to do with a new credit card, call a noted Iowa bankruptcy lawyer and discuss the issues surrounding this type of a situation. It is better to be informed than to find out later the charges may not be covered.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact an Iowa bankruptcy attorney, Iowa bankruptcy lawyer, or set up an appointment, visit or call 1.877.888.1766.

Kevin Ahrenholz
309 Court Ave., Suite 805
Des Moines, IA 50309
Offices in Des Moines, Cedar Rapids, Waterloo, Mason City, and Vinton.

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