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Contesting Bankruptcy Fraud from Holiday Shoppers

 Posted on December 23,2019 in Bankruptcy

Contesting Bankruptcy Fraud from Holiday ShoppersThe average U.S. consumer takes on more than $1,000 in debt each December – much of it related to holiday shopping and put on credit cards. When it comes time to repay those debts, some consumers struggle to keep up with minimum payments and eventually default on their debts. Debtors who qualify for bankruptcy can put unsecured creditors such as credit card companies in a difficult position because the debtor may be able to discharge all or part of their credit card debt at the end of the bankruptcy. Creditors can stop or limit the bankruptcy process if they can show that the debtor is trying to commit fraud.

Amassing Debt

One way that bankruptcy fraud can occur is when the filer takes on debt that they never intended to repay. For instance, a debtor who intends to file for bankruptcy may use a credit card to purchase gifts for the holidays because they believe that they can discharge the debt later. The credit card company may suspect the debtor’s intention and can file a claim of fraud with the bankruptcy court. If the claim is proven, the court may order that the fraudulent debt is ineligible for discharge or dismiss the case.

Presumption of Fraud

It can be difficult for a creditor to prove that the debtor is committing bankruptcy fraud by including debts that they did not intend to repay. Unless the debtor confesses their intentions, the creditor will rely on circumstantial evidence from which the court can reasonably conclude that the debtor intended to commit fraud. For instance, there may be records of the debtor inquiring about bankruptcy or meeting with an attorney before taking on the debt. U.S. bankruptcy law presumes that some financial transactions by a bankruptcy filer are fraudulent and ineligible for discharge, including:

  • Credit cards purchases totaling more than $725 that were spent on luxury items and services within 90 days of filing for bankruptcy
  • Cash advances of more than $1,000 on credit cards that were made within 70 days of filing for bankruptcy

In these situations, the bankruptcy filer must prove that they intended to repay the debts.

Contact a Chicago Creditor’s Rights Lawyer

A lawyer should be one of the first people you talk to when an outstanding debtor decides to file for bankruptcy. An Illinois creditor's rights attorney at Dimand Walinski Law Offices, P.C., can assess the case and determine whether you may be able to stop the bankruptcy. Schedule a consultation by calling 312-704-0771.


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