A common reason people seek relief through Chapter 7 bankruptcy is for help with large amounts of credit card debts. It can be very difficult to repay credit card debts, especially when you have a lot of credit cards and when they have high-interest rates, but you can turn to Chapter 7 bankruptcy if you need help. When you use Chapter 7, you can receive forgiveness of these debts in most cases. Here are two important things you should know about your credit card use and payments when using this branch of bankruptcy.
You should stop using your credit cards
The first thing to understand about credit cards and Chapter 7 is that you cannot continue using your credit cards up until the day you file for bankruptcy, as this can come across as a fraud. Instead, you should aim to stop using them about 90 days before you file. The reason for this is that the trustee assigned to your case will look closely at your credit card statements for the last three months. Purchases made during this time will be closely examined. If the trustee believes that they are luxury purchases, you could end up with your case dismissed or still owing the money you spent during this time.
Additionally, the trustee will carefully examine the statements for cash advances. If you took any cash advance from a credit card within the last 70 days, it will be a red flag. To avoid problems in your case, the best thing to do is to just stop using the cards three months before filing.
You can stop making your payments
Secondly, if you know for sure that you qualify for Chapter 7 and that you will be filing, you can stop making the payments to your credit cards. If you have loads of credit card debt right now, there is a good chance that you might be behind on some of the payments. If so, you probably already have creditors calling you for payment. When you stop making the payments on the rest of your cards, you might end up with more phone calls; however, this will only be temporary. As soon as you file, the calls will end due to the automatic stay offered through Chapter 7 bankruptcy.
If you have questions about Chapter 7 or credit card debt, reach out to an office like that of David M. Todaro Co., LPA.