Black Friday & Bankruptcy (3 TRAPS TO AVOID!)

TL;DR

Be cautious of purchasing luxury items on credit cards and taking cash advances before filing for bankruptcy.

Transcript

hey everybody John skiba here from the consumer Warrior YouTube channel and it is that time of year again where we are going to talk about Black Friday credit card debt and bankruptcy I'm going to share with you three things that you need to watch out for if you're finding yourself in that situation where you may need to be filing bankruptcy in the... Read More

Key Insights

• 🥡 Purchasing luxury items exceeding $800 or taking cash advances over $1,100 can result in those specific debts not being discharged in bankruptcy.
• 👨‍💻 The bankruptcy code does not provide a clear definition of luxury items, but expenses for general living are typically not considered luxury items.
• 🥺 Incurring debt without intending to repay it can be seen as fraudulent by the bankruptcy court and can lead to serious legal issues.
• 💳 If bankruptcy is on the horizon, it is advisable to stop using credit cards completely to avoid potential problems and complications.
• ❓ Bankruptcies have increased significantly due to the current state of the economy.
• ✳️ Black Friday, known for its sales and spending, can pose risks for those in serious debt or considering bankruptcy.
• 👋 Consulting with a bankruptcy attorney can help individuals navigate their debt problems and determine if bankruptcy is the best solution.

Questions & Answers

Q: What qualifies as a luxury item in the context of bankruptcy?

The bankruptcy code does not provide a specific definition, but generally, expenses related to general living, such as groceries or medical bills, are not considered luxury items. Luxury items typically include jewelry, expensive gifts, or high-end electronics.

Q: Can credit card companies object to certain charges being eliminated in bankruptcy?

Yes, if luxury items totaling more than $800 were purchased on a credit card within 90 days before filing bankruptcy, the credit card company can object to those charges being discharged. Their objection may be successful, and the debtor may still owe those specific debts.

Q: Is there a presumption that cash advances taken before filing bankruptcy won't be discharged?

Yes, if a debtor takes cash advances of more than $1,100 within 70 days before filing, there is a presumption that those debts will not be eliminated in bankruptcy. Creditors can raise objections to the discharge of those specific charges.

Q: Can incurring debt with no intent to pay be considered fraud in bankruptcy?

Yes, if a debtor knows they will be filing for bankruptcy or has already retained an attorney for that purpose, using credit cards without any intention to repay the debt can be deemed fraudulent by the bankruptcy court. This can lead to serious consequences and complications in the bankruptcy process.

Summary & Key Takeaways

• Thanksgiving is followed by Black Friday, a day of sales and spending, but it can be problematic for those in serious debt or considering bankruptcy.

• If planning to file for bankruptcy, be aware that luxury items purchased on credit cards in the 90 days prior to filing may not be eliminated in the bankruptcy case if the total exceeds $800.

• Taking cash advances of more than $1,100 within 70 days before filing can also result in those debts not being discharged in bankruptcy.