New Law Changes: Luxury Goods and Cash Advances

[bkfiler]

http://thomas.loc.gov/cgi-bin/cpquery/?&sid=cp1062GHnA&refer=&r_n=sr049.106&db_id=106&item=&sel=TOC_81443&

Section 310. Limitation on Luxury Goods: This section provides that consumer debts owed to a single creditor aggregating more than $250 for luxury goods or services purchased within 90 days before the order for relief are presumed to be nondischargeable. Cash advances that are extensions of credit under an open end credit plan aggregating more than $750 to all creditors within 70 days are also presumed nondischargeable.

http://www.philadelphiafed.org/src/srcinsights/srcinsights/q4_05_cc1.html

http://www.pennlawyer.com/toobad.htm

The amount the debtor must charge for "luxury goods" to be presumed fraudulent is reduced from $1,225 to $500; the amount that the debtor must withdraw in cash advances to invoke the presumption is reduced from $1,225 to $750. The presumption period is increased from 60 to 90 days for luxury goods, and from 60 to 70 days for cash advances.

http://www.expertlaw.com/library/bankruptcy/chapter_7_bankruptcy.html

Some debts are not ordinarily dischargeable in bankruptcy, or can be discharged only under very extraordinary circumstances. Examples of debts which cannot ordinarily be dischared in bankruptcy include child support obligations, student loans, taxes, and damage awards resulting from intentional wrongful acts or intoxication.
Certain debts incurred within sixty days of a bankruptcy petition, such as debts associated with the purchase of luxury goods or cash advances, will not ordinarily be dischargeable.

http://www.bkylaw.com/

There are two consumer debt provisions in the new law of which I want you all to be aware: 1) Consumer debts incurred for luxury goods and services owed to a single creditor in excess of $500 incurred within 90 days of filing are presumed to be nondischargeable; and if you have incurred $500 or more with a single creditor in that 90 day period before filing, it is presumed to be for luxury goods or services. 2) Cash advances in excess of $750 made within 70 days of filing are presumed nondischargeable. These provisions make it easier for a creditor to complain about debt run-up right before the debtor files a bankruptcy.

http://publish.pdesigner.com/rcohenlaw/bankruptcy.jsp

The amount the debtor must charge for "luxury goods" to be presumed fraudulent is reduced from $1,225 to $500; the amount that the debtor must withdraw in cash advances to invoke the presumption is reduced from $1,225 to $750. The presumption period is increased from 60 to 90 days for luxury goods, and from 60 to 70 days for cash advances.

http://www.financial-planning.com/pubs/fpi/20050415102.html

Currently, charges or cash advances of over $1,000 made 60 days before a filing are not dischargeable. The bill would change the limits to $500 and 90 days for charges and $750 and 70 days for cash advances - for each line of credit. The change, aimed at stopping people from loading up on debt before filing, would not apply to charges for necessary goods and services, like groceries or rent.

http://www.abanet.org/genpractice/magazine/aprilmay2005/debts.html

http://www.collectionsworld.com/cgi-bin/readstory2.pl?story=20050701CCRC033.xml

[SinkingFast]

But what exactly are "luxury" goods or services??

Some things are obvious. A cruise. Jewelry. Furs. A trip to a day spa.

What if you bought a purse, or a pair of shoes, or a suitcase in the $100-$150 dollar range. Just odd items I could think of off the top of my head. Would those be considered a luxury??

[Jenny]

From the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:

"the term 'luxury goods or services' does not include goods or services reasonable necessary for the support or maintenance of the debtor or a dependent of the debtor"

[FoolAndHisMoney]

But what exactly are "luxury" goods or services??

Some things are obvious. A cruise. Jewelry. Furs. A trip to a day spa.

What if you bought a purse, or a pair of shoes, or a suitcase in the $100-$150 dollar range. Just odd items I could think of off the top of my head. Would those be considered a luxury??

Trust me some of us bought these items 1 time or another with credit. It's not a crime to buy a cruise, jewelry or spa on credit. Just doesn't look good buying this in months before filing. There's 10 people in the world that can afford to buy this stuff with cash.

Shoes and clothing shouldn't be considered a luxury. If so then the judge on My Cousin Vinny wouldn't be upset that Joe Peshi walked into court with a Captain Kangeroo suit on.

[SinkingFast]

Some times the laws are vague, seemingly subject to interpretation.

"Luxury" could be in the eye of the beholder.

[Jenny]

I think there are a few more than 10 people who can afford those things with cash. It just takes some savings. That's all. I've been wanting to take a cruise for a while, but I'm definitely not going to finance it. I'll pay it in full.

[bkfiler]

'look back' period is the time a trustee can review to determine if assests were tranferred to hid them from creditors, trustee or court. its usually 1 year but your state maybe be different.

[bkfiler]

well i guess you could use that term in many ways. but what i thought you were asking about was the common term where the trustee looks for stuff transferred to other people.

ok i think you mean pay off what you bought recently. i wouldnt. that payment goes toward the first things bought in the queue and interest. they could and would argue that it wasnt paid off. if you can use your bank debit visa so you can get extra protection then i guess i might.

but maybe you dont want the transaction shown on your bank account. that way your attorney could have you spend it as he best sees fit if you know what i mean.

my initial posting above show lots of quotes regarding cash advance and luxury purchases dates.