Don’t splurge before filing bankruptcy

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Dear Bankruptcy Adviser,
I’m planning to file bankruptcy, Chapter 7. Can or should I use my credit card up until I file? Will it have any consequences when I do file? Is there a time span for using it before filing? Thanks.
— Jan

Dear Jan,
When you realize that bankruptcy might be your best option, you should: a) immediately contact an attorney to discuss the timing of your filing, and b) stop using your credit cards. However, there is no specific time span in which you must stop using the cards to best assure your bankruptcy petition will be approved.

You see, not everyone who files Chapter 7 has all of his debts wiped away. When you file your case, your creditors may pull up your account and examine any recent financial activity. They’re looking for what you’d expect: cash advances, luxury purchases (like a $2,000 plasma TV) and the pattern of your overall spending. If they object to anything, even a purchase from six months ago, they file a motion with the court to challenge your bankruptcy.

Both the court and your creditors are interested in your intent. If your prefiling expenses can be justified as efforts to pay your debts, that’s good. If you bought a plasma TV, but have been responsible otherwise, your attorney can negotiate a post-petition payment plan with that particular creditor (otherwise you’ll lose the TV). If it looks like you’re trying to take advantage of the system, you can be denied bankruptcy altogether.