Navigating the Consequences of Maxing Out Credit Cards Prior to Bankruptcy
Declaring bankruptcy post maxing out your credit cards may seem like a tempting route for some. However, this action could potentially disrupt the smooth processing of your bankruptcy claim. Both your trustee and creditors are obligated to examine your spending behavior during the period leading up to your bankruptcy filing.
Typically, a period of 90 days prior to the bankruptcy filing is scrutinized, but this can extend up to a year, or even five years if real estate assets are involved. This extension is especially possible if there’s a suspicion of any misconduct. Making a large purchase or taking out a significant cash withdrawal just before filing bankruptcy is deemed an offence under the Bankruptcy and Insolvency Act.
When this happens, several parties including the trustee, a creditor, or the Office of the Superintendent of Bankruptcy could file an opposition to your discharge from bankruptcy. You might be compelled to attend an examination under oath, explaining your actions and motivations. Consequently, your bankruptcy process may get prolonged as you may need to attend a court hearing to secure your discharge from bankruptcy.
Furthermore, you’ll likely be required to pay the trustee an amount equal to the value of the purchase or cash advance you made. The trustee will then distribute these funds amongst your creditors. In extreme cases, if there’s evidence of fraudulent behavior, the case could be forwarded to the police for criminal investigation, potentially leading to charges of fraud. A finding of fraud could mean that the implicated debt will survive even after a bankruptcy or a proposal.
That 60” TV or the financial aid you sent to your financially-struggling family members may not seem worth the trouble when faced with these potential outcomes.
Hence, in response to the question, “Can I Max Out My Credit Cards and Then Go Bankrupt?” – the answer is a resounding NO. Doing so could lead to serious consequences, far outweighing the short-term benefits of those credit card purchases.
Contact Rumanek & Company. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.