If you want to get the best result for your bankruptcy case, then you need to listen really closely to your bankruptcy attorney when he’s giving out his advice. If you fail to follow the advice, you may find yourself owing people money after your bankruptcy case is over. The most common example of this is when clients incur credit and debt within 60 to 90 days of filing for bankruptcy. Below is the perfect example.
A client comes to me with $50,000 or more in credit card debt, is feeling the pain of that debt and wants bankruptcy relief. I inquired as to whether or not the client has used the cards in the last three months and he tells me yes. I then advise him that he needs to stop using the credit cards if he is going to be filing for bankruptcy. There are provisions in the bankruptcy code which allow for creditors to file complaints against those who utilize the credit or incur charges without an intent to pay it back. There are specific time periods for credit cards and cash advances where the advantage switches to the lender and the burden shifts to the debtor to prove that the charges and advances were not fraudulent. To avoid this issue, the debtor simply has to heed the attorney’s advice and stop using the credit cards.
Unfortunately, many debtors feel that since the ship is going down, they might as well go down as big as possible. Therefore, they will max out their credit cards and utilize every single dollar of available credit before filing for bankruptcy. They will also do this in contrast to their attorney’s advice that they just recently received and were admonished from doing such very act. Even worse, they will tell the attorney that they have stopped using the cards when in fact they continue to use the cards. Depending upon how much debt is incurred and depending upon how close to the filing date it is incurred, will determine whether or not the creditor brings an adversarial complaint to hold the debt non-dischargeable.
If the creditor brings a complaint to determine non-dischargeability of a debt, the debtor will typically not have a good defense. The creditor can find out through discovery when the debtor first met with the attorney, when the debt was incurred of course, and what exactly was purchased. The burden with then shift to the debtor to prove that the purchases were necessities. The court will ultimately make a decision as to whether or not the debt is dischargeable or not. Another problem for the debtor is that the adversarial defense is not typically part of the attorney’s original bankruptcy fee. Thus, the debtor who wants to defend such action would have to pay additional fees to their bankruptcy attorney or they will have to hire a separate bankruptcy attorney to handle the adversary. This additional expense and additional outstanding debt could have been avoided if the debtor simply was not greedy.
If you have credit card debt and are thinking of filing for bankruptcy, you can avoid an adversarial complaint and avoid having to owe money after your bankruptcy case is filed if you simply take your attorney’s advice to heart and follow it. Otherwise, you will ignore the advice at your own peril.
