By: Moisés Reyes
If you are facing a situation of being unable to pay back some amount of debt over any period of time, then bankruptcy may be a viable option to legally clear those debts. Before filing for bankruptcy, however, it is important to understand what kinds of debt can and cannot be included into a bankruptcy filing. In particular, many people wonder whether or not they can include a cash advance into a bankruptcy filing. Along with student loans, domestic support obligations, taxes and tax liens, among other debts, some types of cash advance loans cannot be discharged via Chapter 7 or Chapter 13 bankruptcy. If you are facing the inability to pay back a credit card cash advance or some other payday loan, it is in your best interest to understand whether or not you can legally include these debts into your filing.
It should come to no surprise that filing for bankruptcy will eliminate most credit card debts. However, if a lender has reason to believe and can prove that they were defrauded by the borrower, it goes without saying that the borrower will face some pretty serious consequences. It is fairly rare to find a borrower who will intentionally rack up credit card debt only to then file for bankruptcy in an attempt to avoid repayment. Nevertheless, it does happen, so judges will look for certain behavioral indicators that point to fraud. When it comes to cash advances, bankruptcy law presumes that any cash advance of $750 or more taken out during the 70 days prior to a bankruptcy filing is fraudulent. It makes sense that this would be a palpable hint; who wouldn’t like to splurge and not have to pay for it?
Of course, a "luxury" purchase is probably not worth all the detrimental financial complications that come with bankruptcy, but for those who believe the opposite, this behavior will not result in bankruptcy, as they expect, but with charges of credit card fraud. This is certainly not a situation anyone would want to find themselves in. Regarding the differences between Chapter 7 and Chapter 13 bankruptcy, a Chapter 7 filing will require the borrower to pay the full amount of a payday loan before the debt can be discharged after bankruptcy.
Filing for bankruptcy is a decision that must be made very carefully and with much consideration. Although it will not necessarily ruin your entire financial future, it will indeed affect your entire financial future in some way, in many cases quite negatively.