Credit Card Before Bankruptcy

Getting a credit card before filing bankruptcy is legally permissible and ethically proper, provided that you intend to repay the charges and are not planning to eliminate and wipe out the card balance, since that would not be honest and would be fraudulent.  If you were to obtain a credit card right before bankruptcy, charge it up and then file bankruptcy on the charges that you made, then clearly there would be something unethical and morally wrong about that.  In fact, it could be considered fraudulent, in that you made a promise (to repay the charges that you made) without really have the intention of performing the promise to repay the charges.  When you make a promise to pay credit card debt but intend to and do file bankruptcy on the charges, your actions fall within the legal definition of fraud.


There is nothing wrong with going about your life and charging your credit cards for necessities of life, fully intending to repay the charges, and then getting into a situation falling victim to unexpected circumstances such that a bankruptcy lawyer determines that filing a credit card bankruptcy would be your best option for debt relief.  But if you charge up your cards fully knowing that you plan to file bankruptcy on your credit cards, that would be dishonest.  In fact, the closer your filing date is to the time that you charged up your credit cards, the more likely it is to appear as though you knew you were going to file at the time that you charged up your cards.  


Also, the greater the number of the payments that you make on your credit cards after you charge them up and before the date that you file for bankruptcy relief, the more it will appear to a reasonable person that you intended to repay your cards, made your best good faith effort to do so, but in good faith were unable to repay the charges.  Conversely, the fewer payments you make on your cards after you charge them and before you file, the more likely it is to appear that you did not intend to repay the cards at the time that you charged them up.


For example, if you pulled out $50,000 in cash advances on your credit cards the month before you filed, it will clearly appear to be fraudulent conduct on your part.  A reasonable person would assume that you have most of the money stashed away and are not disclosing it to the court.  But if you charged $50,000 on necessities over a 2-4 year period, then made a year of minimum payments, and then file, it will likely not appear that you had any fraudulent conduct.


Because intention is a very difficult thing to prove (it is something in your mind) in San Diego debt relief cases, a fact finder will necessarily need to look at the circumstances, called circumstantial evidence, to determine what your state of mind must have been.  Nobody is going to come right out and admit that they charged up their cards without having an intention to repay them, the surrounding circumstances are the best indicator of your true intentions. Hence, the proximity of your filing date to the date that your credit card charges were made is an important factor in assessing your true intentions.  For this reason, if you are considering getting a credit card before you file bankruptcy in San Diego, you and your lawyer should discuss the possibility that you may have to repay credit card debt charged up within a very short amount of time prior to your filing date.