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Can a Chapter 7 debtor discharge recent credit card debts?

If you are a Florida resident considering filing bankruptcy as a way to discharge your debts, you likely have substantial credit card debt that is contributing to your problem. Credit card debt usually is discharged in a Chapter 7 bankruptcy. However, Bloomberg recently reported that under Section 523(a)(2)(C)(I) of the Bankruptcy Code, there is a presumption against discharge of any debt you owe to a single credit card company that was used to purchase consumer goods exceeding $675 or if you made these charges within 90 days of filing bankruptcy.

The issue in the case before the Bankruptcy Court for the Northern District of West Virginia was that of a debtor who had gotten a cash advance of nearly $8,000 on one of her bank credit cards about two months before filing for bankruptcy under Chapter 7. The bank argued that this debt could not be wiped out by bankruptcy due to the presumption.

The court finding

Judge Patrick M. Flatley found that the bank failed to carry its burden of proof in this case. Specifically, the bank failed to prove that the debtor intended to deceive it when she used its credit card at the time she used it. The court found that the debtor did not engage in any trickery or deception against the bank and did in fact intend to repay her debt in the regular course of business.

In addition, the debtor successfully rebutted the presumption against discharge. Her testimony showed that the purchases she made with the cash advance were reasonable and demonstrated typical credit card usage.

The lesson to be learned from this case is that if you are considering bankruptcy, you would be wise not to overload your credit cards immediately before filing for Chapter 7. Such credit card activity could be considered deceit. Should a credit card company dispute the discharge of the purchases you made within 90 days of filing, you will have the burden of proof to rebut the presumption against discharge.

This information is provided for educational purposes and should not be interpreted as legal advice.

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