Kentucky Bankruptcy Law

Counsel with Care

Post-Holiday Pitfalls for Bankruptcy part 2

My prior post gave some tips for dealing with purchase money security interests, but this one today goes a totally different direction. We leave behind bankruptcy code section 522 and turn to 11 USC Sect. 523(a)(2)(A)-(C). These provisions all boil down to the non-discharge of fraudulent debts. Automatically we think of the person who goes on a spending spree for Christmas knowing they would be filing bankruptcy early in the new year. Definitely, they are running a risk here, but the reach of this provision is much further than that and so you will want to take a closer look.

That last provision, 523(a)(2)(C), gives some specific circumstances that constitute fraud and they have NO intent element. If you used a single credit card to buy Christmas gifts aggregating more that $500.00 in the 90 days before filing, you are presumed to have incurred that debt fraudulently. If you switched up and ran up more than $500 each on three different cards for Christmas gifts 90 days before filing bankruptcy, well all three of those debts are presumed to be non-discharged due to fraud. Furthermore, if you took out cash advances aggregating more than$750 from a single creditor in the 70 days prior to filing, that is also presumed to be fraudulent.

These debts are not automatically excluded from discharge, but the creditor has the right to object to their discharge. If the bare facts explained above are present, then the burden becomes yours to prove there was no fraud. Since intent is not part of the equation, this would be a hard thing to do.


January 4, 2013 - Posted by | Bankruptcy, Chapter 13, Chapter 7, Fraud, Pre-filing planning | , , , , , ,

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