debts incurred by way of luxury goods and services

[Yami]

Is it correct that those debts incurred for luxury goods and services in excess of $500 within a ninety-day period of the filing of the petition are non-dischargeable? I have difficulty in understanding the time period condition. Does the time phrase refer to ninety days PRIOR to the filing? Thanks again!!!

[emoney]

The exact wording is in the new BK law. The intent was to force persons, if able, to repay so of their debts.
regards,
emoney

[HHM]

Yes, it means on or within 90 days prior to the Filing Date of your petition.

[ameliabedilia]

I went on pacer last night to check on my trustee. I found a case of his that is crazy!
This couple started charging on their american express about 6 months before they filed, and they had tons of purchases under $600, but to places like Pier 1, Polo, Tommy Bahama, Nordstrom.
American Express is objecting because the considered it a change in spending habits, and they were doing so much retail purchases, even though it was before the 90 days.
Very crazy case- looks like a soap opera!

[Minnymouth]

Some folks believe they can go out right before filing bankruptcy, charge a lot of stuff they have been wanting, and then get it discharged in the bankruptcy....

That is not always the case..... The Trustee will determine if it is "fraudulent spending" especially if the creditors object to it being discharged.....

To run out, use those cc everyday on shopping sprees, then file bankruptcy "will not fly" - it only raises red flags for everyone!!!

For example, you decide you want new appliances and furniture before you file bankruptcy...... you go get them, charge them, and 60 days later you file bankruptcy. The creditor is going to scream bloody murder.........and object. And the Trustee is going to "listen" very loudly to the creditor.....

Your case can be dismissed for such actions, or if not dismissed then the Trustee can make you pay for these charges and object to them being discharged. So you end up paying for them anyways or the creditor picks them up.

Its best to wait 90 days or more after you use your credit cards to file, then few questions will ever be asked.... The longer you wait, the better it is for you and your case.

Filing bankruptcy is not a "free ticket to buy new things"....... and expect the creditor to write it off.....

Listen to what your attorney says.......he usually knows what your Trustee will allow and what he won't.

[a.fla]

Hopefully they don't do that to us! We have a lot of purchases from Aug/September to buy our 2 children a new wardrobe of school clothes and shoes. They both grew out of everything from the previous year. My husband needed all new clothes for his new job too and I bought 3 pairs of new jeans and new winter shoes. Totalling probably $700 - $800 for everything. No reciepts to prove this either because we didn't know we were filing BK then.

[HHM]

I need to correct a few things you said Minny...the trustee does not MAKE the debtor pay back those charges. Only a creditor that objects can do that. In fact, the trustee doesn't really care about fraudulent charges because the creditors have a mechanism (i.e. objection to discharge) to protect their interests. The trustee represents the creditors collectively, thus, the trustee cannot represent the interests of one creditor over another. The trustee really only cares about getting money and non-exempt assets to benefit ALL creditors. So when it comes to fraudulent use of credit before filing BK, the BK trustee is generally not involved, and in fact, the BK trustee does NOT WANT to dismiss the case.

However, if the fraud of the debtor is rampant, then the US trustee can get involved and file an objection under Section 727 of the BK Code (for chapter 7 cases).

In any event, it is quite rare for a case to dismissed when someone makes illicit purchases just before a BK. The worst case scenario is that the BK judge declares certain debts non-dischargeable under Section 523(a)(2) of the BK code as a result of a creditor's successful objection.

[a.fla]

Thanks HHM!

[jp2861]

I need to correct a few things you said Minny...the trustee does not MAKE the debtor pay back those charges. Only a creditor that objects can do that. In fact, the trustee doesn't really care about fraudulent charges because the creditors have a mechanism (i.e. objection to discharge) to protect their interests. The trustee represents the creditors collectively, thus, the trustee cannot represent the interests of one creditor over another. The trustee really only cares about getting money and non-exempt assets to benefit ALL creditors. So when it comes to fraudulent use of credit before filing BK, the BK trustee is generally not involved, and in fact, the BK trustee does NOT WANT to dismiss the case.

However, if the fraud of the debtor is rampant, then the US trustee can get involved and file an objection under Section 727 of the BK Code (for chapter 7 cases).

In any event, it is quite rare for a case to dismissed when someone makes illicit purchases just before a BK. The worst case scenario is that the BK judge declares certain debts non-dischargeable under Section 523(a)(2) of the BK code as a result of a creditor's successful objection.

This is the kind of information that needs to be on sticky's. Example: Here's what happens if a creditor objects. And then explain the process. I think it would eliminate alot of guessing and not-so-factual answers.

[ameliabedilia]

I was told by one of the lawyers we visited that creditors will look at a "change in spending habits", even if it is well past the 90 day mark. If you use your card at Walmart and the grocery store, then for two months use it to buy plane tickets, electronics and furniture, then wait 6 months to file, they can still object and definitely be heard.