December 15, 2017

Will Recent Use of Credit Cards for Necessities Like Food and Clothing Prevent me from Filing Bankruptcy?

expensive litigationThere is no perfect time to file for bankruptcy.  Ideally, you should wait to file at a point when you have not touched your credit cards for several months and your credit card charges over the past year have not taken a big jump.  Further there is less chance that you will face any objection if you have made at least the minimum payment over the past 6 months or longer.

Section 523 of the Bankruptcy Code sets out a number of situations in which credit card debt will not be discharged.  Section 523(a)(2)( c) makes non-dischargeable consumer debt totaling more than $500 for luxury goods and services owed to any one creditor that are incurred within 90 days of filing, or cash advances totaling $750 or more owed to any one creditor made within 70 days of filing.

Section 523(a)(2) makes non-dischargeable debt owed to a creditor that was incurred by false pretenses or by fraud.

Basically, then, Section 523 gives credit card lenders at least two arguments to challenge a debtor:

  1. recent credit card use (within 3 months) for anything but necessities like food, clothing and shelter
  2. any credit card use in the recent past (in my experience this can be up to a year prior to filing) if a debtor makes charges where there is no reasonable expectation of repayment.    [Read more…]

New Credit Card Protections Trigger Higher Fees by Card Issuers

As you may know, last year Congress passed a law called the Credit Card Accountability Responsibility and Disclosure Act of 2009.  This law, nicknamed the CARD Act of 2009, was designed to regulate a variety of unpopular credit card tactics, such as interest rate increases without notice, inactivity fees and unfair interest calculations.

According to credit card industry analysts, the CARD Act of 2009 will eliminate over $390 million in fees for credit card issuers.  Not surprisingly, the credit card companies do not intend to walk away from this fee income.  For every fee and penalty eliminated by the CARD Act, credit card issuers are finding replacements.   For example the annual fee for many cards has been increased, sometimes dramatically.  Card issuers are also sending corporate card applications (called “professional cards”) to consumers.  Corporate cards are not included in the CARD Act.

The Wall Street Journal recently ran a story explaining how the credit card companies intends to recoup their lost fee income.   The bottom line: the CARD Act of 2009 will eliminate some consumer-unfriendly tactics used by the credit card companies, but it will trigger an equal number of new consumer-unfriendly tactics.  Caveat Emptor.

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