Our clients often ask us about taking on new debt either before filing or after filing for bankruptcy. Bankruptcy is a complex area of law. Taking on new debt right before bankruptcy can certainly cause problems with your case. Taking on new debt right after bankruptcy is possible, though generally not advisable.
If you have questions about using credit cards or incurring other debts before or after bankruptcy, contact our office at (912) 351-9000. We can schedule a free consultation. Together we will explore how bankruptcy will affect you and your family.
New Debt Before Bankruptcy
The federal Bankruptcy Code contains rules regarding debts incurred before filing. These laws are designed to prevent abuse of the bankruptcy process. Debts incurred right before filing bankruptcy may be nondischargeable, which are debts that cannot be erased through bankruptcy. If a debt is determined to be nondischargeable, that debt must be paid back after bankruptcy.
Incurring debt without the intention to pay it back can amount to bankruptcy fraud. You are precluded from taking on new debt right before filing for bankruptcy without the intention of paying it back (or, with the intention of erasing it through bankruptcy). For instance, a person cannot run up a credit card for luxury items and turn around and erase those debts in bankruptcy.
Credit Card Charges Before Bankruptcy
The look-back period on certain charges is 90 days prior to the date your bankruptcy petition is filed. There is a rebuttable presumption that “debts owed to a single creditor and aggregating more than $675 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable.” 11 U.S.C. §523(a)(2)(C)(i)(I).
Read more in our article Using Credit Cards Before Filing Bankruptcy. If you have recently incurred new debt and are considering bankruptcy, we encourage you to consult with an experienced bankruptcy attorney to understand how it may affect your filing.
New Debt After Bankruptcy
Debts incurred prior to filing for bankruptcy may be erased through bankruptcy. Any debt incurred after the date your case is filed cannot be included in your bankruptcy case and will not be discharged in that bankruptcy case.
Once your bankruptcy case concludes nothing precludes you from incurring new debt. However, we strongly urge our clients to carefully consider taking on new debt post-bankruptcy. We want our clients to get the most out of their bankruptcy discharge. After bankruptcy, you are debt free, with a clean slate and the opportunity to make wise financial choices moving forward. Incurring new debts too soon after bankruptcy can harm the financial fresh start that bankruptcy provides.
Our one caveat to this: as part of rebuilding credit you may consider getting a new credit card after bankruptcy. We encourage this only for people who are in a position to only charge what they can afford and who will pay off their bill in full and on-time every month. Read more in our article Credit Cards After Bankruptcy.
Are You Struggling with Debt?
If you are exploring how bankruptcy can help you get out of debt, we encourage you to seek the counsel of an experienced bankruptcy attorney.
Here at the Law Office of Barbara B. Braziel we have over 35-years of bankruptcy experience. We are the premier bankruptcy law firm in Savannah, GA and we practice exclusively in bankruptcy law.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.