In any financial or legal proceeding, there are often little pitfalls that you have to watch out for. One common mistake that consumers make is purchasing something on credit just before they declare personal bankruptcy. This is certainly something you need to watch out for because you can be accused of fraud!
You have to understand that creditors are out to get as much from you as possible. After all, if you took on a debt, then they have a legitimate right to try and collect their money. However, sometimes this leads them to aggressive actions such as accusing you of fraud. You are not guilty of fraud if you are declaring bankruptcy because you have reached a point where you cannot pay your bills.
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At the same time, you need to be careful and make sure that your actions are as clean as possible. If you charge something just before bankruptcy and never intended to pay for it, you could be guilty of fraud. The creditors have to prove several things including the fact that you deceived the creditors and consequently caused some monetary damage to them.
Never take the risk of accumulating debt just before your bankruptcy petition. For example, if you make a luxury purchase of more than $500 within 90 days of bankruptcy or cash advances of more than $750 within seven days of bankruptcy, the bankruptcy court will presume that you are committing fraud.
In such cases you as a debtor would have the burden of proof. You have to convince the court that you fully intended to pay back the creditors. The exact definition of a luxury item may not be set in stone in the bankruptcy code, but you should be careful and not take any chances. If you've already made a purchase, your bankruptcy attorney may recommend that you wait a few months before filing.
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