What if a creditor claims fraud on my credit card debt?

A creditor can file an adversary proceeding arguing that the debt was obtained by fraud, false pretenses, or a false financial statement under section 523(a)(2). They must prove you had no intent to repay when you made the charges. This is relatively rare and the creditor bears the burden of proof.

Discharging Credit Card Debt in New York Bankruptcy

Q: Are there exceptions for recent credit card charges?

Yes. Under 11 U.S.C. section 523(a)(2), luxury goods or services charged to a single creditor totaling more than $800 within 90 days of filing are presumed nondischargeable. Cash advances totaling more than $1,100 within 70 days of filing are also presumed nondischargeable. The creditor must object to prevent discharge.

Q: Will bankruptcy stop credit card collection calls and lawsuits?

Yes. The automatic stay under 11 U.S.C. section 362 immediately stops all collection calls, letters, lawsuits, wage garnishments, and other collection activity. In New York, creditors can garnish 10% of gross or 25% of disposable wages (whichever is less), so the stay provides immediate relief.

Yes. Credit card debt is unsecured debt and is generally dischargeable in both Chapter 7 and Chapter 13 bankruptcy. In Chapter 7, the debt is eliminated in 3-4 months. In Chapter 13, you pay a portion over 3-5 years and the remainder is discharged.

Chapter 7 vs Chapter 13 for Credit Card Debt

Chapter 7

Credit card debt eliminated in 3-4 months
No repayment required
Must pass the means test (median income $66,973 for 1 person in NY)
Non-exempt assets may be liquidated (but most filers keep everything)
Filing fee: $338

Chapter 13

Pay a portion of credit card debt over 3-5 years
Remaining balance discharged at end of plan
No means test income limit - available to all
Keep all your property
Filing fee: $313
Unsecured creditors often receive 0-10% of what they are owed

Exceptions: When Credit Card Debt Is NOT Dischargeable

Recent Luxury Purchases (90-Day Rule)

Under 11 U.S.C. section 523(a)(2)(C), charges for luxury goods or services to a single creditor totaling more than $800 within 90 days of filing are presumed nondischargeable. "Luxury" generally means anything that is not reasonably necessary for support - groceries and utilities are fine, but a new TV or vacation charges could be challenged.

Recent Cash Advances (70-Day Rule)

Cash advances totaling more than $1,100 within 70 days of filing are also presumed nondischargeable. This includes convenience checks and balance transfers that are treated as cash advances.

Fraud

If a creditor can prove you incurred the debt through fraud, false pretenses, or a false written statement (like lying on a credit application), the debt may not be dischargeable under section 523(a)(2)(A). The creditor must file an adversary proceeding and prove their case - the debt is not automatically excluded.

New York Garnishment and Collection

Before filing, New York credit card holders face these collection tools:

Wage garnishment: Creditors with a judgment can garnish the lesser of 10% of gross wages or 25% of disposable earnings. The automatic stay stops this immediately.
Bank account restraint: New York allows creditors to freeze bank accounts with a restraining notice. However, accounts with less than $3,600 (240 times the state minimum wage) are exempt from restraint.
Statute of limitations: New York has a 6-year statute of limitations on credit card debt. After 6 years without payment or acknowledgment, the debt is time-barred from lawsuit (but not from collection calls).

Practical Tips

Stop using credit cards as soon as you decide to file. Charges made after the decision to file can be challenged as fraudulent.
Wait 90 days after your last significant credit card purchase before filing, if possible.
Do not pay preferred creditors. Paying one credit card but not others in the 90 days before filing can be clawed back by the trustee as a preferential transfer.
List all credit cards on your schedules, even those with zero balances. Failure to list a debt can prevent its discharge.
Keep statements. Your last 6 months of credit card statements will be reviewed during the 341 meeting.

Frequently Asked Questions

Can I discharge credit card debt in bankruptcy?

Are there exceptions for recent credit card charges?

Yes. Luxury goods or services charged to a single creditor totaling more than $800 within 90 days of filing are presumed nondischargeable. Cash advances totaling more than $1,100 within 70 days of filing are also presumed nondischargeable. The creditor must object to prevent discharge.

What if a creditor claims fraud?

A creditor can file an adversary proceeding arguing that the debt was obtained by fraud or false pretenses under section 523(a)(2). They must prove you had no intent to repay when you made the charges. This is relatively rare and the creditor bears the burden of proof.

How much credit card debt do I need to file?

There is no minimum amount of debt required to file bankruptcy. However, because of filing costs ($338 for Chapter 7, plus attorney fees typically $1,000-$2,000 in New York), bankruptcy usually makes practical sense when credit card debt exceeds $10,000.

Will bankruptcy stop credit card collection calls and lawsuits?

Yes. The automatic stay immediately stops all collection calls, letters, lawsuits, and wage garnishments. In New York, creditors can garnish 10% of gross or 25% of disposable wages (whichever is less), so the stay provides immediate relief.