It is hard to believe that the holidays are upon us once again. And love it or hate it Black Friday and become a holiday tradition for many people where they stake out their claim for the great deals of the holiday season.

While it can be easy to get caught up in the holiday spirit and go a little (or a lot) overboard on gift giving, if you are putting those purchases on a credit card it could have lasting consequences if you are needing to file bankruptcy in the near future.

Here’s how –

Credit Card Purchase for “Luxury Items” Prior to Filing Bankruptcy

In the typical chapter 7 bankruptcy most unsecured credit card debts will be completely eliminated.  In fact, that is why many people choose to file for chapter 7 bankruptcy is because of the ability to eliminate credit card debt without any type of payment.

However, the Bankruptcy Code states that if a person purchases a “luxury item” on a credit card within 90 days prior to filing for bankruptcy there is a presumption that the specific charges on the credit card that were used to purchase the “luxury item” will not be eliminated in the bankruptcy.

The Bankruptcy Code does not define what a “luxury item” is, but courts have ruled that necessities like gas, groceries, diapers, and general living expenses are not “luxury items”. It is safe to say that if one purchased expensive jewelry, vacations, or other non-necessary items within the 90 days prior to filing for bankruptcy that there would be a much stronger argument that those debts would not go away.

Also, it is important to understand that simply purchasing a luxury item on a credit card within the 90 days prior to filing bankruptcy does not mean that the debt automatically is not eliminated. In fact, the credit card company would be required to make an appearance in your bankruptcy case and file an objection with the court as to those specific charges. If the credit card company does not object then the debt will be eliminated along with all of the other credit card charges.

Cash Advances Prior to Filing Bankruptcy

Another tricky area is when a cash advance is made on a credit card within 70 days prior to filing for bankruptcy. Let’s say you decide you want to pull a little extra walking around money off of the credit card before the big Black Friday events.

If you then filed for bankruptcy within 70 days there would be a presumption that those credit card advances do not go away. Again, the credit card company would have to come into your bankruptcy case and raise an objection to the charge being eliminated in your bankruptcy and if they didn’t it would still go away with all the others unsecured debts.

Good Luck on Your Black Friday Shopping!

We here are the Arizona Consumer Law Group hope you have a great  holiday season and that your Black Friday deals are so great that you don’t even think of putting them on a credit card!

If you are tired of dealing with your debt problems give us a call and we would be happy to sit down in a free consultation to discuss how you can become debt free once and for all.  Fill out the form below or give us a call at (480) 420-4028.


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