When people file bankruptcy, they are typically at the end of their financial tight rope, so to speak. For years, they divvied up their disposable income between disconnection notices and whichever creditors made the most noise, but there was never enough money to spread out to everyone. So, when it comes time to file bankruptcy, it might seem savage that you have to pay a filing fee and attorney fees.
The majority of people who file bankruptcy wait until they are searching for coins in the laundry room or between the couch cushions. They wait until they do not have any money left to pay for the bankruptcy filing fee, which makes filing for bankruptcy even more taxing and arduous.
Paying Bankruptcy Fees With Credit Card Might Be a Crime
If you saved some leeway on one of your credit cards, however, you might think you can use it to pay the filing fees. Better yet, you might be able to pay for your attorney’s fees with your credit card, too. After all, your credit card account will probably be discharged in your bankruptcy.
Unfortunately, this would be a bad idea. This thought process has occurred to many people filing bankruptcy, but using your credit card to pay for your bankruptcy filing fees and attorney fees is committing fraud. If you charge your credit card with the intention of not paying it back, you can be prosecuted and the consequences include fines and jail time.
That being said, most bankruptcy lawyers will not accept a credit card from the debtor. If a family member or friend is willing to pay your fees with their credit card, the lawyer will probably accept the payment. Be prepared to bring your family member or friend with you if they are paying your fees to prove that you have their permission to charge their credit card.
Cash Advances and Payday Loans Can Be Fraudulent, Too
You might consider taking out a payday loan or a cash advance from your credit card to pay your fees. How would the loan or credit card company know that you are paying your bankruptcy fees with the cash you got from the loan or advance? When you file bankruptcy, the small details, like whether or not the loan or credit card company knows how you spent the cash, do not matter.
The U.S. Bankruptcy Code 11 U.S.C. § 523 explains something very important that anyone filing bankruptcy should be aware of before they file bankruptcy. The code states that luxury purchases over $500 within 90 days prior to filing bankruptcy are nondischargeable. It also states that any cash advances over $750 within 70 days of filing bankruptcy are nondischargeable. Furthermore, if the bankruptcy trustee deems either type of transaction fraudulent, you could face serious fines and jail time.
Bankruptcy code specifies that luxury purchases are not “goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor.” Since this does not create a clear picture, the determination of whether or not you purchased luxury items is left up to your bankruptcy court. This means that if you went on vacation or bought jewelry, new furniture, or technology, or even paid for your attorney and bankruptcy fees, none of the outstanding debt in this category will be discharged.
What a Charge is Deemed Fraudulent?
What will happen to my bankruptcy case if a charge is presumed fraudulent? One of your creditors will be required to file an objection to discharge within your bankruptcy case to ask the court to declare the charge nondischargeable. This does not mean that your entire case will be discharged or dismissed.
During this adversary proceeding, as it is called in the court procedures, you bear the burden of proof. This means that you will have to prove that the charge was not fraudulent. The creditor does not have to prove anything.
Charging up a pile of debt before filing bankruptcy send up red flags, also. If you do this, any of your creditors or your bankruptcy trustee can ask the court to disallow your bankruptcy discharge. Unfortunately, making hasty financial decisions right before filing bankruptcy could be perceived as fraudulent behavior.
How Do I Pay My Bankruptcy Fees, Then?
If you really are destitute at the time that you file your bankruptcy petition, you have options that can help you pay your bankruptcy fees. Bankruptcy courts offer fee waivers and payment plans for bankruptcy filing fees, so be sure to ask how you can apply for them. Your attorney might work out a payment plan, as well. Before you make any last-minute financial decisions, talk with your bankruptcy court or attorney to find out what options are available to you.