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Court says recent credit card charges not evidence of fraud

Florida residents who are struggling with debt might wonder whether they can file for bankruptcy and if they can discharge recent debts. In a West Virginia case, a bank tried to claim that a debtor could not discharge almost $8,000 worth of credit card debt incurred around two months before she filed for Chapter 7 bankruptcy. Under the Bankruptcy Code, a person cannot discharge debt for services incurred within 90 days of the bankruptcy filing or for luxury goods if a single creditor is owed more than $675 for those goods. The woman had taken a cash advance on her credit card in the amount of approximately $8,000 two months before her bankruptcy filing.

However, after looking at the woman's spending and hearing her testimony, the bankruptcy court found that the bank could not present evidence that the money had been spent on luxury goods. The only items that might have been classified as luxury goods were a computer game and a pair of boots for $420. Since the woman lost her home in a fire, the court said a charge of $183 to Kohl's could have been for necessities.

The court found the charges reasonable and typical based on the debtor's testimony. Furthermore, the judge argued that there was no evidence that the woman attempted to engage in fraud.

Struggling with debt can be stressful and overwhelming, and a person might wonder what kind of debt relief is available. Either a Chapter 7 or a Chapter 13 bankruptcy may be a possibility. Under a Chapter 7 bankruptcy, a person may discharge most debts. While some assets may be liquidated, others are exempt. With a Chapter 13 bankruptcy, debtors restructure their obligations under a court-approved plan that lasts either three or five years.

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