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Bankruptcy Law/credit card 90 day rule

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Expert: - 6/29/2006


Question
Will you explain the rules surrounding credit card use prior to filing chapter 7?  The reason I ask is; I am a loan officer in Michigan and our mortgage business is a mess out here.  I haven't closed a loan in some time.  I've been using credit cards to pay bills, buy groceries, gas and so on.  I have a son that is chronically ill and although he is an adult and doesn't live here, I give him money too when he misses work.  My house is for sale and I'm moving into a co-op. So, I've stopped using my cards but I heard that if you use them 90 days prior to filing a bk, you can't include that debt in the bk.  Is that true?

Answer
I'm truly sorry to hear about your difficulties. The answer to your question is: Yes, and no.

Charging $500 or more for luxury goods or services on an account within 90 days prior to bankruptcy is "presumed to be non dischargeable," and cash advances of $750 or more within 70 days are also "presumed to be non dischargeable."

However, the burden is still on the creditor to go through all the trouble of filing a lawsuit in the bankruptcy court to seek a judgment of nondischargability. If they fail to successfully bring an action, the debt gets discharged anyway.

But, there's more. Those time frames, (90 days and 70 days) just mean that such debts are presumed to be nondischargeable. That means the debtor has the burden of proof at trial to prove that the debt was not incurred fraudulently. It doesn't stop a creditor from seeking nondischargeability on charges that were made a lot earlier than that, where the evidence indicates there was use of credit under fraudulent circumstances. Don't think that waiting 90 days puts you in the clear. The only difference is a shift on who has the burden of proof at trial.

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Los Angeles Bankruptcy Lawyer Leon D. Bayer

Expertise

Leon Bayer has successfully represented clients in bankruptcy for over 30 years. He is frequently called upon by the media, the California Bar and other associations to provide insight and help educate attorneys on bankruptcy issues. If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/ Leon also writes about bankruptcy law for Nolo, see http://www.nolo.com/law-authors/leon-bayer.html and his "Ask Leon" bankruptcy law blog column at http://blog.nolo.com/bankruptcy/

Experience

Leon is a Certified Specialist in Bankruptcy Law by the State Bar of California, and has been a practicing bankruptcy lawyer in Los Angeles, California for 33 years.

Organizations
National Association of Consumer Bankruptcy Lawyers, California Bar Association, Los Angeles County Bar Association.

Publications
Author, ?The Essentials Of Chapter 13,? Daily Journal Report, December 18, 1987.
Contributing Editor, Basic Bankruptcy, California Practice Handbook, Matthew Bender 1992, 1993.
CEB Consultant, CEB-Personal and Small Business Bankruptcy Practice in California, 2003.


Education/Credentials
B.A., J.D.

Awards and Honors
President, 1995-1996-Los Angeles Bankruptcy Forum; Member - Los Angeles County Bar Association Committee on Commercial Law & Bankruptcy, 1988. Law Advisory
Commission-Personal & Small Business Bankruptcy Law of the State Bar of California, 1996-2000

MR. BAYER SAYS: The big banks and credit card companys have been working overtime for many years to undermine the Consitutional right of the American people to be able to claim bankruptcy protection. In 2005 the banking lobby successfully convinced Congress and the President to make the laws and proceedures more complicated, hopeing that it will stymie legitimate people from filing bankruptcy. They succeeded in gaining these complex new legal proceedures by greasing the legislative system with hundreds of millions of dollars in "campaign contributions." The good news for the American people is that while the new laws have made the proceedures needlessly complex to the point where inexperienced people can't help but trip over the maze of new rules and regulations, the process is still doable, especially with a lawyer who is well trained and experienced in this specialty.

Past/Present Clients
I have probably handled something on the order of about 15,000 bankruptcy cases thropughout my career.

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