Question: As a result of heavy debt and a drastic cut in income, I recently spoke to a bankruptcy trustee. We determined that bankruptcy is the only realistic option available to me, and I’ve decided to take that step. In the meantime, however, day-to-day bills and expenses have been piling up. I have a bank-issued credit card that’s been sitting around unactivated for several months (the only one that isn’t maxed out, I hate to admit); is it fraudulent if I activate the card and use it while I know full well that I’ll be declaring bankruptcy two or three weeks later? Can it affect the bankruptcy process in any way?
Answer: Yes, using a credit card that you have no intention of repaying is fraud. It is a criminal offense, and if the amounts are significant you could face severe penalities. If the amounts are not large, it is likely that the creditor would request that you repay the money you spent on the credit card in the three months before your bankruptcy. If you don’t repay the money, the credit card company could pursue you for fraud after your bankruptcy is finished.
If you are going to go bankrupt, stop using your credit cards immediately. You will also stop making payments on your debts, which should free up enough cash for you to pay your day to day living expenses.
Using credit cards before a bankruptcy is a serious issue, and one you should discuss with your bankruptcy trustee.