The luxury goods presumption
Under 11 U.S.C. § 523(a)(2)(C), there is a rebuttable presumption that certain debts incurred shortly before filing are nondischargeable:
- Consumer debts over $725 for luxury goods or services incurred within 90 days of filing to a single creditor
- Cash advances over $1,000 within 70 days of filing
If a creditor files an adversary proceeding, you bear the burden of proving you did not intend to defraud them. The presumption of fraud shifts the burden to you.
11 U.S.C. § 523(a)(2)(C)(i)(I): Consumer debts owed to a single creditor and aggregating more than $725 for luxury goods or services incurred within 90 days before filing are presumed nondischargeable.
What counts as luxury goods?
"Luxury goods or services" does not include goods or services reasonably necessary for support or maintenance. Groceries, medical expenses, and basic necessities are not luxury goods. But electronics, vacations, expensive clothing, and entertainment are.
The line is not always clear. Courts look at the totality of the circumstances -- what you bought, when, and whether you had any reasonable expectation of being able to pay.
What actually happens
Most credit card companies do not pursue nondischargeability actions over small amounts -- it is not worth the legal cost. But for larger charges (several thousand dollars or more), the creditor may file an adversary proceeding alleging fraud under § 523(a)(2).
If the court finds fraud, those specific debts survive your bankruptcy. You still owe them after discharge.
Stop using credit cards as soon as you decide to file bankruptcy. The safest approach is to stop all credit card usage immediately. Pay for necessities with cash or debit. The longer the gap between your last credit card charge and your filing date, the safer you are.