Fast, Effective Debt Relief

Should you spend money right before bankruptcy?

On Behalf of | Mar 20, 2024 | Bankruptcy

You’ve reached the point where you’re going to file for bankruptcy. Maybe you have a lot of outstanding debt, such as medical bills, credit card debt, a car loan and the like. You just want to declare bankruptcy to eliminate your debt and give yourself a fresh start.

But as you look at your credit card account, you notice that you haven’t maxed out those cards. Since you’re going to declare bankruptcy anyway, should you spend the remaining balance? Would it be wise to max those cards out so that the debt can just be forgiven in a few months?

This could be a form of fraud

You should not do this intentionally. If you’re doing it on purpose just to run up the cards before you file for bankruptcy, the court may view that as bankruptcy fraud. You are essentially trying to defraud creditors by spending money that you know you will never even attempt to pay back.

If you are accused of fraud, it could derail your entire bankruptcy case. Even if all of the other debt is legitimate, the court may throw out your case and refuse to give you the fresh financial start that you’re seeking.

That said, people are sometimes accused of fraudulent spending prior to bankruptcy, but they do not feel they did anything wrong. The key is to focus on keeping your spending habits as close to normal as possible. Necessary spending – paying the rent, buying groceries, etc – is not prohibited, but excessive spending could be problematic.

All throughout this process, make sure you are well aware of your legal rights and obligations – especially if you have been accused of fraud or any other conduct detrimental to your case.