We have spent a lot of time discussing whether you should file for bankruptcy. You and your spouse have gone home and talked about it at length and have come to the same conclusion that I did: there is no way you can put food on the table for your family, pay the mortgage, the car payment, utilities, insurances, and the other things you need to do to survive and still pay the credit cards.
But should you stop using credit cards? And if so, when should you stop?
With very few exceptions, the answer I will give you is “Yes, stop using the cards immediately.”
I tell this to my potential clients as they are leaving my office, even if they have not made a final decision just yet. Why do I do this?
Why Should You Stop Using Credit Cards?
First, there are some legal reasons, as running up your credit cards shortly before you file for bankruptcy could subject you to any number of legal issues. Among those are:
(1) The creditor whose card you used can challenge your ability to have their debt discharged (the reason to file for bankruptcy usually is to get this discharge) by bringing legal proceedings with the Bankruptcy Court;
(2) The creditor whose card you used could challenge your ability to get a discharge from any of the debts on your bankruptcy; in other words, a challenge to the bankruptcy itself;
(3) Other parties, such as the United States Trustee’s Office, the Interim Trustee appointed by the Court to your case, or even the judge herself or himself can challenge your ability to get a discharge because of your spending just before you filed for bankruptcy.
These are some of the significant actions that would be obstacles to your entire reason for filing the bankruptcy petition, and that’s to get rid of your debts. If these challenges find you in a trial facing the Judge in the Bankruptcy Court, it can also cost you a lot of additional money.
Then there is the primary reason I tell people not to run up their charges prior to filing for relief under the Bankruptcy Code and that is, I believe it is ethically wrong to do so. Other than very special circumstances, such as medical emergencies, I will tell you this in no uncertain terms.
Virtually all of my clients understand this. They get it. They already feel badly enough for not being able to make the payments. They don’t want to compound things by purchasing things that they cannot afford knowing that they will be using the good laws of our country to help give them relief. If you are considering bankruptcy and have a specific situation that you would like to ask about, contact Steidl & Steinberg and we will do our best to give you good advice on this sensitive issue.