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Can you add debt recklessly and then file bankruptcy?

You and your spouse are facing bankruptcy. You finally decide to do it. It feels like a big weight has lifted off of your shoulders. Then your spouse proposes an idea: Why not start spending some money?

After all, you have credit cards. Sure, you may lose assets when you file for Chapter 7, but what if you buy things that no one can take back?

Maybe your spouse wants to go on that vacation to Australia that you've talked about for years. Maybe he or she wants to hit up all of the fancy restaurants in town one last time before filing. Maybe your spouse suggests just taking some time off of work and living on your credit cards until your funds really run dry, just charging as much as you can.

That's often considered fraud. Surprisingly, it's one of those bankruptcy myths that just keeps hanging around. People think that they're filing anyway so they'll just create a lot of new debt and then discharge it along with everything else.

Courts don't usually agree. Normal spending is fine. You have to put food on the table and keep the lights on. Reckless spending right before your filing, though, is a red flag. You could be ordered to pay that money back, even if your bankruptcy filing would otherwise have been successful.

As you can see, it's important to know the facts when considering bankruptcy. Don't get drawn in by the myths, as tempting as they may be, and be sure that you really know what your legal obligations are.

Source: US News, "5 Bankruptcy Myths Debunked," Susan Johnston Taylor, accessed May 25, 2017

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