What credit card purchases are looked at in a chapter 7 bankruptcy?
What credit card purchases are looked at in a chapter 7 bankruptcy? Featuring Attorney Paul Urich.
Attorney Tom Olsen: When they file a Chapter 7 Bankruptcy, how far back does a trustee look as far as credit card charges to see what's going to be able to wipe out in bankruptcy and what cannot be wiped out through bankruptcy?
Attorney Paul Urich: The Code provides that any credit card use in excess of $900 to a single creditor could be considered a fraudulent transfer. It would be the creditor that would file what's called the adversarial to block the discharge of that debt. The industry standard is 180 days. They like to look back for the six months leading up to filing if there was any large significant credit card use or balance transfers during that period of time.
Attorney Tom Olsen: When you say creditor; the creditor is going to be the credit card company. It's not going to be where you made the purchases at?
Attorney Paul Urich: Correct.
Attorney Tom Olsen: Are they looking for purchases, like for example, they went to Publix 10 times a week and that's legitimate? They were buying their groceries there, but they also went down to the furniture store and bought a living room suite. Does that matter to the bankruptcy court?
Attorney Paul Urich: The bankruptcy court doesn't necessarily worry about what the credit cards were spent on as much as the timing of how it was spent, and whether or not the debtor acquired non-exempt assets from the credit cards that they didn't disclose. What the creditors are looking at is what the cards were used for. It's one thing if you have a $1,200 charge at AAMCO to rebuild a transmission. It's another thing when you've got 4,000 bucks at Jared for a Rolex.