A Compassionate,
 Full Service Law Firm

If you’re going to file for bankruptcy, can you max out credit cards?

On Behalf of | Jan 13, 2025 | Bankruptcy And Debt Relief

You’ve decided to file for bankruptcy. While you do have some credit card debt, most of your financial struggles stem from unavoidable medical expenses. You want to use bankruptcy to eliminate this debt and create a more stable financial future.

However, now that you’ve made the decision to file for bankruptcy, you may take another look at your credit card balance. For example, suppose you have a card with a $5,000 balance and a $30,000 limit. Should you max out the card by quickly spending an additional $25,000 before filing for bankruptcy? After all, if the debts are going to be discharged, wouldn’t it make sense to spend as much as possible?

Your bankruptcy could be denied

You cannot do this, and the reason is that the bankruptcy court will review your spending to determine if you are attempting to commit fraud. If your spending increases significantly right before you file for bankruptcy—particularly on luxury items or non-essential goods—your bankruptcy case could be dismissed entirely, or those debts could remain even if other debts, such as medical bills, are discharged.

This doesn’t mean you cannot spend money at all. Bankruptcy can take months, and you will still need to pay for necessities such as food, transportation, utilities and rent. However, if your spending appears to go beyond basic needs, the court may view it as an intentional effort to accumulate extra debt before discharging it through bankruptcy. This could jeopardize your case.

As you can see, it’s crucial to fully understand how the bankruptcy process works and what legal steps to take.