At Kennel Zeigler, LLC, in Ohio, we understand that overwhelming credit card debt can get you in a lot of trouble. The card balances increase faster than you can pay them down, and the monthly interest charges eat you alive. You may have heard that you can get your credit card debt discharged in a Chapter 7 bankruptcy, and this is true enough. However, if you have begun thinking about bankruptcy as your only way out, you would do well to stop using your credit cards now. Why? Because the Bankruptcy Court may not discharge your recent credit card debt.
As reported by Bloomberg News, the Bankruptcy Code Section 523(a)(2)(C)(I) includes a presumption against the discharge of the debts you incur from a creditor within 90 days of the date on which you file bankruptcy if those debts represent your purchase of consumer goods amounting to $675 or more.
How the presumption works
One Chapter 7 debtor recently ran afoul of this presumption. The Bankruptcy Court for the Northern District of West Virginia heard the resulting case. Approximately two months prior to filing bankruptcy, the woman obtained an $8,000 cash advance on one of her credit cards with which she purchased household items and other consumer goods. The bank behind her credit card objected to the discharge of this debt, using the Bankruptcy Code presumption as its main point of argument.
Luckily for this particular Chapter 7 debtor, the Court overruled her bank’s objections. It held that the presumption is a rebuttable one that a debtor can overcome by clear and convincing evidence. The Court believed the woman’s testimony, backed by receipts and other documentation, and held that while her purchases totaled well over $675, they represented household goods and products that consumers normally buy on credit. It likewise believed her testimony that she fully intended to pay back her cash advance at the time she obtained it. Finding that her actions did not constitute fraud, trickery or deceit, the Court discharged this debt along with her other eligible debts.
Regardless of the fact that one bankruptcy court discharged one debtor’s recent credit card debt because she successfully rebutted the presumption against discharge, your best interests dictate that you do not attempt the same strategy. Your attorney will tell you that it is a highly risky one at best.
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