Theresa Chalfant, Writer
@theresa_chalfant
No, you should not max out your credit cards before filing for bankruptcy. While it’s possible to do so, it could be considered fraud and may prolong your bankruptcy proceeding if your card issuer decides to contest it. Also, depending on which type of bankruptcy you file for, your credit card debt may not be discharged in full, meaning you’ll still have to pay off whatever balance remains.
- Chapter 7 Bankruptcy: Chapter 7 is the most common type of bankruptcy filing, and it usually results in the discharge of all unsecured debts, including credit card balances. However, creditors can ask the court to revoke your discharge or make your credit card debt non-dischargeable if they believe that you committed fraud.
- Chapter 13 Bankruptcy: Unlike with Chapter 7, Chapter 13 bankruptcy requires you to restructure and pay off as much of your debt as possible in exchange for keeping some or all of your assets. Credit card debt is given the lowest priority, but if your recent behavior appears to be fraudulent, your credit card company may try to convince the bankruptcy court that your debt to them shouldn’t be discharged.
It's never a good idea to put yourself in more debt, and bankruptcy should be avoided until you’ve exhausted all other options. You can read WalletHub’s full guide on bankruptcy to better understand how the process works. You can also browse the best bankruptcy cards to find credit cards that you can use after your bankruptcy is over.
People also ask
When should you stop using credit cards before filing for bankruptcy?
You should stop using credit cards within a few months of filing for bankruptcy if you don’t need them for necessities like food, utilities or rent. Any other purchases and cash advances made shortly before filing for bankruptcy can be considered irresponsible or fraudulent. In other words, it will appear that you incurred credit card debt with the intention of not repaying it. As a result, the debt won’t be discharged and you’ll be held...
read full answer by John Miller, Credit Cards ModeratorShould I stop using my credit card before filing Chapter 7?
Yes, you should stop using your credit card before filing for Chapter 7 if you don’t need it for necessities, like food, utilities or rent. Using your card before bankruptcy for things other than necessities can be seen as fraudulent or irresponsible behavior by the bankruptcy court.
Tips on Using Your Credit Card Before Filing for Chapter 7
- Timing Matters: Credit card transactions made just before filing for bankruptcy may attract scrutiny....
What will my credit score be after bankruptcy?
The average credit score after bankruptcy is about 530, based on VantageScore data. In general, bankruptcy can cause a person’s credit score to drop between 150 points and 240 points.
In most cases, your credit score will drop more after a bankruptcy filing if it was in good shape beforehand. The effect on your credit score can also vary based on the number of accounts and the amount of debt in your bankruptcy filing;...
read full answer by WalletHub, Financial CompanyDid we answer your question?
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