When Should You Stop Using Credit Cards Before Filing Chapter 7 Bankruptcy?

Thinking about Chapter 7 often starts with one simple question: When should I stop using my credit cards? The timing really matters, and a few small choices can make your case go smoothly and be much less stressful.

At Yusufov Law Firm, serving Tucson, Mesa, and Phoenix, we help people stop collector harassment, protect homes, and get a fresh start. If you run a small business, we also help with plans that can keep operations going while debts get addressed.

Bankruptcy can pause lawsuits and wipe out certain debts, but it also comes with rules that you need to know. Our job is to help you use those rules to regain control. If you are weighing your options, feel free to call us for straight answers.

Credit Card Usage and Chapter 7 Bankruptcy

Chapter 7 can discharge a lot of unsecured debt, including credit cards. Still, using cards right before filing can cause headaches if the charges look like you never meant to pay them. Creditors, and sometimes the trustee, will review recent activity closely.

The safest rule is simple: stop using your credit cards as soon as you start thinking seriously about filing. That choice lowers the chance of a fight over recent charges. Knowing how timing works helps you avoid problems that can delay or block a discharge of certain debts.  This article is informational only, and does not constitute legal advice—always consult a bankruptcy attorney for your specific situation.

Why You Should Stop Using Credit Cards Before Filing

Large or unusual charges close to your filing date can raise fraud concerns. Creditors look for patterns like luxury spending, cash advances, or a sudden run-up in charges after cards went past due. If a creditor proves you had no intent to repay, those debts can survive the case.

Even without direct proof, the law creates shortcuts for creditors in some situations. That is where the presumption of fraud rules come in.

Presumption of Fraud: Purchases and Cash Advances

The law treats certain recent charges as presumptively fraudulent. This means the burden shifts to you to show the charges were not abusive. Two categories trigger this presumption: luxury purchases and cash advances, if they meet the dollar amount and timing rules.

Luxury Goods and Services

If you charge more than $900 for luxury goods or services to a single creditor within 90 days before filing, the presumption applies. Luxury means non-essentials, not items needed to maintain work, health, or basic living. Think entertainment, high-end gadgets, designer clothing, or vacations.

Cash Advances

If you take more than $1,250 in cash advances from a single creditor within 70 days before filing, the presumption applies. Cash advances are often a red flag, even when used for everyday needs, so treat them with extra caution.

Consequences of Presumptive Fraud

If a creditor objects, it files a lawsuit within the bankruptcy case, called an adversary proceeding. You would then need to prove that the charges were not fraudulent to have them discharged. Losing that lawsuit leaves you on the hook for those debts after bankruptcy.

Type of Transaction	Time Window Before Filing	Dollar Threshold	What Triggers the Presumption	Practical Effect
Luxury goods or services	90 days	Over $900 with one creditor	Non-essential purchases exceeding the limit	The burden shifts to you to prove no fraud
Cash advances	70 days	Over $1,250 with one creditor	Total cash advances exceeding the limit	The burden shifts to you to prove no fraud

 

If your recent activity stays outside these windows or below the amounts, the creditor has a tougher road. That said, they can still try to prove actual fraud using other evidence.

Exceptions: Necessary Expenses Before Filing

Life happens, and sometimes you need to use a card for basics while you get ready to file. Charges for necessities are different from luxury spending. Essentials cover the things you need to work and live.

• Groceries and basic household supplies.
• Utilities, rent, and modest phone or internet service are needed for work or school.
• Medical care, prescriptions, and essential car repairs or fuel.

If you must use a card for these items, keep clean records. Save receipts, statements, and notes showing why the expense was needed.

When to Cease Credit Card Payments Before Filing

Pay the minimums until you confirm that you qualify for Chapter 7 and have a plan in place. Stopping too early can leave you with late fees and collection pressure if you later decide not to file. Once you are certain about filing, it is appropriate to stop paying on unsecured credit cards.

Here is a simple way to time that step without tripping yourself up.

1. Confirm your eligibility and filing chapter with a lawyer.
2. Set aside funds for attorney’s fees and the court filing fee.
3. Pick a target filing date, then pause credit card payments going forward.

If a creditor has a bank relationship with you, such as a credit union you owe, move your deposits to a bank you do not owe before you stop paying. This helps protect your funds from setoff.

Actions That Can Be Viewed as Fraudulent

Certain patterns can look like an attempt to game the system. Creditors watch for these signals and bring them up at the 341 meeting or in court.

• Running up charges shortly before filing or after receiving past-due notices.
• Increasing spending in the months leading up to filing, especially on non-essentials.
• Using cards after meeting with a bankruptcy lawyer or after deciding to file.
• Trying to bypass a spending limit with many small transactions.

If any of this happened, bring it up with your attorney so you can prepare an honest and clear response.

Consequences of Fraudulent Actions

If a creditor proves fraud, the court will not discharge that part of the debt. Collection can resume after your case ends. Defending a fraud lawsuit can get expensive, which is why many people end up settling for repayment of the challenged amount.

A clean pre-filing plan helps you avoid that risk. Stop using cards early, skip cash advances, and keep records for any true necessities.

How to Approach Credit Cards During and After Bankruptcy

You list only the cards with a balance when you file. Even so, most issuers learn about the case and cut off charging privileges, including zero-balance accounts. Paying a card to zero before filing does not protect that card from being closed.

After your discharge, offers for new credit often come faster than you expect. Start small and pay in full each month to rebuild. If you owe money to your credit union, shift your checking and savings to a bank you do not owe, since credit unions can restrict services when they take a loss in your case.

Seeking Financial Guidance? Contact Yusufov Law Firm Today

Debt problems can touch every part of your life, from the car you drive to the roof over your head. We review your situation, explain options like Chapter 7 and Chapter 13, and build a plan that fits your goals. We help individuals and business owners in Tucson, Mesa, and Phoenix regain control and move forward.

Do you have questions right now? Call us at 520-745-4429 for our Tucson office or 480-788-0098 for our Mesa/Phoenix office, or reach us online. We work to deliver practical results, one step at a time.