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Using your credit cards before bankruptcy in Toronto: Fine or fraud?

credit cards before bankruptcyA lot of people I see in my office have serious credit card debt, and rely heavily on them for household expenses, like groceries or gas. Some of these people even continue using their credit cards right up to the first meeting in my office. When is this practice fine and when is it fraud? What happens if I use my credit cards just before I declare bankruptcy in Toronto?

If you use your credit cards the week before you declare bankruptcy, you need to understand that your credit card company is not seeing the fact that you need help with your bills, but the fact that you are in fact taking money away from them and then stating, a week later, that you can’t afford to pay them back. In essence, you’re stealing from the credit card company, and this is where the situation gets tricky.

When people come into my office for their first meeting and they have recently used their credit cards, I check to see what they have used them for. Was it for groceries? For gas? For household supplies? If this is the case, and the amounts are small, then it’s not a significant problem. This is probably how you got into trouble in the first place. You have lost your job, or you’re sick and you can’t afford to work, or you’re going through a separation and you are adjusting to a one-income lifestyle, or you’re having trouble managing your money. You’re using your credit cards to fill in the shortfall between the money you make and your expenses, and the week leading up to you declaring bankruptcy is no different. But if you purchased a 54-inch plasma TV, or went on an all-expenses-paid vacation to Greece the week before declaring bankruptcy, then there’s a problem. If you can’t afford to pay off your credit card and other unsecured debt, you can’t afford the television and you really shouldn’t be flying off to enjoy exotic vacations. This is where you have committed something fairly close to fraud. You purchased items that you couldn’t afford with money that was not yours without any intention of paying it back. You very well may end up having to pay back the credit card company for those specific purchases, or at the very least return the items in order to give the credit card company back their money.

At our first meeting, I will tell you not to use your credit cards anymore, even for basic expenses. At this point you won’t be responsible for any more bills incurred by your debt, meaning you should have money available to buy the things that you need now. If you continue to use your credit cards, it isn’t fair or ethical, considering you know that you can’t pay any of the money back. If you’re relying on your credit cards for household expenses, or you have questions about your debt and bankruptcy, give us a call at 310-PLAN or e-mail us with our online contact form. We will answer any concerns you might have. We’ll set up a free meeting to discuss your situation and help you find the solution that can get you a relief from your debts and overwhelming bills.

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