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Could my Black Friday spending affect my bankruptcy filing?

It was the busiest weekend of the year for shoppers. The annual deal days began on Thanksgiving Day, often referred to by retailers as "Gray Thursday." Even those who firmly believe the day is best spent at home with family had plenty of time to take advantage of the discounts.

Black Friday, Small Business Saturday and Cyber Monday all follow right after. While the spending itself has not slowed, a significant portion has shifted online. You might be someone who decided to avoid the lines and hassle by shopping in your pajamas. Of course, online shopping requires a credit card.

Adding items to your bag is the easy part. It becomes a bit harder to click "confirm" when you see the total cost of all items. You might agonize over which ones to keep or save for later. Maybe you even knew your purchases would be a strain on your finances, but could they affect your bankruptcy filing?

You can make charges on your credit card right up until the day you file, and it will not prevent you from seeking relief. The problem with doing so is that you run the risk that you will not be able to discharge the recent credit card debt and be forced to pay it anyway.

Under Section 523 of the bankruptcy code, the court may exclude credit card debt obtained with the intent to defraud a creditor (ie- purchases made knowing or expecting that the court would discharge them through bankruptcy).

Lawmakers wrote Section 523 to protect creditors. What do you, as a consumer, need to know about this exception?

  • Amount and timing: The court presumes purchases of $500 or more to a single creditor made within 90 days or cash advances of $750 or more made within 70 days are fraudulent.
  • The exception applies to aggregate purchases: You do not have to make a single
  • The exception applies only to suspect debt: A creditor cannot exclude the entire outstanding balance, only the debts that fall within the presumption timeframe or those that the court deems you made with fraudulent intent.
  • Fraudulent intent can be actual or constructive: In cases in which the creditor argues that you made purchases with the intent to defraud, the creditor does not have to prove their claim beyond a reasonable doubt. The court can imply consent based on your actions.
  • The exception applies to luxury items: The section excludes transactions for goods or services that you need, within reason, to support yourself or your family.
  • Creditors must make the request: The court will not automatically exclude the debt. The creditor does have to take action, but in many cases will in order to hold you liable for as much debt as possible.

The most important thing to remember is that the you can always challenge the creditor's claim. Even in cases where fraud is presumed based on timing, you can argue otherwise. Of course, it helps to have an attorney on your side who has successfully argued thousands of cases already.

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