Vance P. Truman, Attorney at Law
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You can't rack up debt right before bankruptcy

One of the biggest misconceptions about modern bankruptcy laws is that you can rack up as much debt as possible right before you file. After all, you're going to eliminate all of your debt anyway. Why not add to it before you do?

Under current laws in Ohio, this is illegal. There's a 90 day period before the filing in which you can't have any major purchases or spending that is out of the norm.

For example, perhaps you have a credit card with a $12,000 limit. You already have $8,000 on the card, and that's part of the reason you need to file for bankruptcy in the first place. Before you do, you decide to just blow through the other $4,000. You're not going to pay any of it back, so does it matter if it's $8,000 or $12,000?

It does, because what you're trying to do is fairly transparent to the lenders. They'll object, and the court may then rule that, while the $8,000 can be discharged with your other debt, you still have to pay back the $4,000 on your own.

This doesn't mean you're not going to spend anything in the 90 days before you file. You may still use the card to buy gas, groceries and other things that are in line with your general spending. You just can't head to the mall and rack up $4,000 of debt in one afternoon, clearly trying to exploit the process.

Do you have any questions about bankruptcy? Getting the answers can help avoid common mistakes, and our website can be quite helpful.

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