Took out a $7,500 loan two months ago from my credit union to try and consolidate my debt. Wait to file Chapter 7?

Answer:

Debts from purchases and cash advances taken just before filing for bankruptcy may not be “discharged”, or wiped out by the bankruptcy. They are presumed to be incurred by fraud. These include amounts owed for luxury goods purchased within 90 days of the bankruptcy and cash advances taken within 70 days of the bankruptcy.

Obviously, your situation is different since the loan was for bill consolidation. In your case, the creditor would have to file a claim in your Chapter 7 to have the debt determined to be non-dischargeable. The credit union would have the burden of proving that you took out the loan with no intent of repaying it.

If you are making the monthly payments and continue to do so up to the time you file the Chapter 7, I don’t see how the credit union could show that you had no intent to repay. I am admitted to practice in Maryland. When I have a client in a similar situation, I always advise them to continue making the minimum monthly payment and if at all possible, to file the chapter 7 after ninety-one days has passed from the date the debt was incurred. I recommend that you consult with a bankruptcy attorney in your state of residence. Good luck.


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