This personal bankruptcy question was posted on the internet in 2011 in a bankruptcy discussion: “Going to see an attorney on Monday. Meanwhile, there is not enough money to sustain everything and get into a rental home. Is it a bad thing to use the credit cards right now for gas, food, etc.? Would that be fraud since it’s so soon before filing?”
In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act. The idea was to help control perceived abuses like certain types of fraudulent acts made by filers.
Bankruptcy fraud is a crime. While difficult to generalize across legal entities, common criminal acts under bankruptcy laws typically involve concealment of assets, concealment or destruction of documents, conflicts of interest, fraudulent claims, false statements or declarations, and fee fixing. Falsifications on bankruptcy forms often constitute perjury.
Here are three important sections in the Bankruptcy Code dealing with fraud:
- Section 547 basically states that a trustee can potentially confront any transfer of funds between a debtor and an insider, meaning a relative or close friend, if the transfer is related to a pre-existing debt and the payment occurred within twelve months of the bankruptcy filing. Preferential treatment, payments made within 90 days of the filing, might be confronted if perceived by the bankruptcy court to have been paid by the debtor to a creditor he or she favors.
- Section 548 gives the trustee the power to confront any transfer of assets made in a fraudulent manner to anyone within the past 24 months before the bankruptcy filing. Here, intent comes into play in determining whether or not the act is fraudulent. Fraud is often hard to prove, but when there is proof, felony charges might be brought against the violator.
- Section 727 of the Bankruptcy Code gives the Bankruptcy Court the legal authorization to deny a debtor a discharge in their bankruptcy case for certain fraudulent violations against creditors and the bankruptcy estate. To be denied the discharge, it must be proven the debtor transferred property within one year of the filing date with the intent of defrauding his or her creditors or the bankruptcy estate.
Can you use your credit card for necessary living expenses right before you file bankruptcy? Regardless of how honorable you might think your reason is for making such a transaction, if you think you are going to file bankruptcy while knowing the transaction may be discharged, the answer to the question is NO. The reason for this answer is because your intention is to use credit where you will be the beneficial recipient of the transaction knowing you will never legally have to pay the debt back.
The act of using your credit card in this manner can be viewed by the bankruptcy court as fraudulent. That is why many bankruptcy lawyers will advise you not to use your credit cards any once you decide to file.
If you live in or around the metropolitan area of Baton Rouge, Louisiana, contact us here today at www.bankruptcyhome.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.