Can I Make Large Purchases Before or After Filing for Bankruptcy?
Bankruptcy is a debt relief option that can stop creditors from taking action against you if you are delinquent on loans. When you file for bankruptcy, most of your debt is discharged or wiped out. If you want to make purchases before or after filing, it could affect the process or result in more debt.
Making Purchases Before Filing for Bankruptcy
When you file for bankruptcy, you are claiming that you are unable to pay the outstanding amount of your debts. Making a purchase on credit before the process finishes could raise a red flag for creditors or the judge reviewing your case. Generally, if you purchase a large item within 90 days of filing for bankruptcy, your creditor may challenge the purchase, and it might not be discharged with the rest of your debt. You will be responsible for paying the amount you charged.
In some cases, significant spending before filing for bankruptcy could result in allegations that you are committing actual or constructive fraud. With actual fraud, the creditor claims you made a purchase with the intent to defraud the company. Constructive fraud charges could occur if you did not intentionally defraud the company, but because you made a purchase before filing for bankruptcy, fraud was implied.
Making Purchases After Filing for Bankruptcy
In many situations, it is possible to make a large purchase on credit after you file bankruptcy. However, before making this decision, you must consider your financial situation and the conditions for the type of bankruptcy you filed. For some types of bankruptcy, you may be required to get permission prior to buying a high-priced item. You must also determine if the purchase is a necessity and, if you are purchasing on credit, how incurring the debt will affect your finances.
If you are planning to make a large purchase, you will typically have to rebuild your credit before buying a luxury item. It could take months or years for your score to improve, and even after the increase, you could face high interest rates because of the bankruptcy.
Contact Albaugh Law Firm for a Free Initial Case Evaluation
If you’re having trouble keeping up with your expenses, contact our team to discuss your debt relief options. We have extensive experience in bankruptcy law and will thoroughly review your financial situation to determine solutions that may be right for you.