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Can you spend a lot right before bankruptcy?

You already know that you're going to declare bankruptcy. However, you still have a number of credit cards that aren't maxed out. Can you spend a lot of money right before you file?

For instance, maybe you're thinking of taking that dream vacation. If you're going to discharge your debt regardless, what's another $10,000 on the credit cards? You might as well have some fun and then file, right?

Wrong. People have done this and court rulings have strongly determined that it counts as fraud. It's a common misconception that you can charge up new debt immediately before filing, but the reality is that this can derail your case and you'll likely be stuck with the debt.

This principle is actually very important, even if you're not trying to commit major fraud for thousands of dollars. The court is going to take a very close look at your spending before the filing to make sure it appears normal. Anything out of the ordinary could be called into question.

So, what is normal spending? That's a bit of a gray area, but it just means your spending is basically in line with what you'd normally see, without any large rises. The court understands that you have an electric bill that needs to get paid or that you have to buy food and clothes for your kids. It's not as if you can't spend money on anything. You just have to make sure they're justifiable expenses that fit your lifestyle.

As you can see, to have the best chance of getting your bankruptcy filing to go through, you really need to know the ins and outs of the legal system in advance.

Source: US News, "5 Bankruptcy Myths Debunked," Susan Johnston Taylor, accessed Oct. 18, 2017

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