Using Your Credit Cards Prior To Bankruptcy or Proposal

Using Your Credit Cards Prior To Bankruptcy or Proposal

What would happen if someone went on a spending spree or took cash advances and maxed out all of their credit cards before filing for personal bankruptcy or filing a consumer proposal?

As tempting as it sounds, borrowing money with the intent of not paying it back may be considered fraud which is a criminal offence.  While your creditors may not pursue criminal charges, they will review your credit card transactions for the year prior to your personal bankruptcy or consumer proposal filing and may decide to take action based on their findings.  Debts from fraudulent activities are not dischargeable in a personal bankruptcy or in debt settlement through a consumer proposal.  This means that these debts won’t go away and the creditor could pursue recovery of the debt even though you filed for bankruptcy or filed a proposal.

If you are attempting a consumer proposal and have recently run-up your credit card, that creditor will likely not vote in favour of your proposal which could lead you to personal bankruptcy as the only means to resolve your debts.  In a personal bankruptcy, your conduct in running-up a debt prior to bankruptcy could be used to oppose your discharge from bankruptcy.  An opposition to your discharge will prompt a court hearing. The courts may then require that you repay some or all of these debts as a condition of discharge from your bankruptcy or impose harsher penalties for your conduct.

If you are having a difficult time paying your debts, we recommend that you cease using your credit cards and contact a licensed insolvency trustee to review your situation and discuss your options.

For a free consultation over the phone or in person in Saint John, Moncton, Fredericton or Charlottetown, please contact us.  Powell Associates Ltd. is a licensed insolvency trustee focused on providing debt settlement, proposal and bankruptcy solutions for individuals and businesses.