Debts Dischargeable Through Bankruptcy: Credit Card Debts And Fraud

Credit card debt is the third largest source of debt in the U.S. An average household has a debt of about $15,600. Although filing for bankruptcy can discharge credit card debts, taking advantage of your credit card prior to filing for bankruptcy may constitute as fraud. Creditors can file a complaint or a dispute against you via an Adversary Proceeding, which will then be reviewed by the bankruptcy courts. If you are found guilty, you will be held responsible for paying back the debts even after your bankruptcy case has closed.

Fraud Looks at The Intention to Pay

If you have used your credit card to purchase goods with no intention to pay off your debt later on, it constitutes as a fraud. Luckily, the burden of proof is on the creditors who have to prove that not only did you have an inability to pay, but there was also the intention of not paying. Building a strong case that there was an intention of not paying is difficult. Although bankruptcy courts give creditors a huge advantage most of the time, cases built on this premise are normally deemed invalid.

If your creditors do submit a complaint about fraud, you or a bankruptcy attorney will need to submit a response to the allegations being made within a reasonable amount of time. If you fail to do so, the bankruptcy courts may rule in favor of the creditors by default. When submitting your response, provide evidence that you did intend to pay off the debts at the time of the purchase.

Fraud Is Dependent on the Type of Purchase Made and the Timeline

Although creditors have to prove that you did not have the intention to pay off debts you have incurred, any credit card purchases that were made totaling over $650 for luxury goods within 90 days of filing for bankruptcy are automatically deemed to be nondischargeable. If you have taken out cash advances on your credit card within 70 days of filing for bankruptcy, they may also be deemed as nondischargeable.

The courts do not have a specific outline regarding the type of items that are deemed as luxury goods. As a result, this is a debatable matter in court, and you may need an experienced bankruptcy attorney to represent you to avoid being stuck with the debt after the bankruptcy case is over.  In general, any goods considered to be unnecessary for the support and maintenance of the debtor is considered to be a luxury good. The amount that was spent on the goods will also be taken into account by the court to determine whether the goods are considered to be luxurious or not.

For example, groceries and medical bills for emergencies are considered as non-luxury, and can be discharged. On the other hand, electronics, magazine subscriptions and even medical services for cosmetic reasons, like Botox, are considered unnecessary and deemed as a luxury. It is your responsibility to prove that the purchases that you made were necessary to your survival and living to get the debts discharged.


If you are found guilty of committing fraud or taking advantage of the dischargeability of credit card debts, the bankruptcy courts may declare the debts as nondischargeable, which means that you will still be responsible for paying them off. To prevent this from happening, make sure that you use your credit cards as little as possible after filing for bankruptcy, and to consult with a bankruptcy attorney immediately if creditors file a nondischargeability complaint against you. You might also want to speak with an attorney to determine what purchases are considered appropriate and what purchases may raise a red flag to avoid having to go through an Adversary Proceeding completely.