There’s no feeling quite like trying to use your card at an ATM or in a store, only to be told they can’t accept it. It’s embarrassing, frustrating, and a real sign that your finances aren’t quite where you thought they were. In fact, you probably have no idea where all your money went.
So, now you’re considering filing for bankruptcy to have your unsecured credit card debt discharged.
But how does that work if you think you’ve been a victim of credit card fraud?
There are two different types of credit card fraud:
- Involuntary
- Voluntary
Involuntary Fraud
You might have found yourself in a situation where you\’ve become a victim of identity theft or credit card cloning, and your card has been maxed out as a result.
Even shredding your personal documents and financial statements is no guarantee that you won\’t fall victim to identity theft. Foreign holiday locations are where most people suffer some form of credit card fraud due to card cloning scams, or ATM skimmers – both of these are the most common types of involuntary credit card fraud.
In certain situations your bank will be able to refund the money charged to your card, but that’s also not guaranteed. But if you’ve been defrauded to the tune of tens of thousands of dollars, and you have no way to prove it wasn’t your fault, then you very well may have no other choice but to file for Chapter 7 bankruptcy to have that debt dismissed.
The good news is that credit card debt due to fraud can be discharged through bankruptcy, except in very rare circumstances.
Voluntary Fraud
Is it even possible for a person to be responsible for credit card fraud against themselves. When you take the literal word of the law into account, then the answer here is a resounding “Yes”.
Far too many people assume they can simply file for bankruptcy to discharge their total credit card debt, regardless of the cause, but this simply isn’t true. In fact, if you knowingly defrauded a credit card company then there’s no guarantee that the court will discharge your debt.
The court will view your credit card debt as fraud if:
- You lied on your credit card application, including making misrepresentations about your income, employment status, and anything that would affect your ability to repay your debt.
- You purchased luxury items or services using your credit card within 90 days of filing for bankruptcy. This includes any single purchase of more than US$600, or any cash withdrawal of more than US$700 during that timeframe.
- You continued using your credit card in the knowledge that you were technically bankrupt and had no way to repay any debt incurred i.e. the credit card company can demonstrate you made multiple purchases in a single day, but at the same time were not paying your minimum payments to them.
Basically, if the credit card company can prove in court that you signed up for a credit card, and then maxed it out shortly before filing for bankruptcy it is highly unlikely that debt will be discharged. What you did was commit fraud in the eyes of the court, even if you don’t see it that way.
The bankruptcy process is there to help people who have, through no fault of their own, suffered unexpected and undue financial hardship due to becoming unemployed, for example. It should never be viewed as a way to simply write off debts you no longer want to have to deal with.
Please always consult with an experienced bankruptcy attorney before making any rash decision which might have a significant impact on your financial future.