What Problems Will I Face if I Recently Transferred
a Large Balance to a New Credit Card?
Credit card companies mail marketing offers by the millions. If you have ever owned a credit card, your name and address will become part of publicly available databases of credit card users that will be rented and used by all of the major credit card issuers.
Balance transfer offers have become very popular in recent years. If you have been making minimum payments only and struggling to pay high interest cards, an offer that promises zero or low interest rates for three to six months may seem very attractive.
As you might imagine transferring a balance from one card issuer to another can be a problem. As a rule, old credit card debt is easier to deal with in a bankruptcy. New debt, whether the result of recent purchases or the result of a balance transfer, can give rise to discharge challenges in either Chapter 7 or Chapter 13.
Cancel Any Pending or Planned Credit Card Balance Transfers
If you are thinking about filing for bankruptcy and have not yet applied to transfer your balance from a high interest card to a low interest card, we recommend that you take no action prior to speaking to one of our lawyers. New activity of any type (new purchases or new charges) can create problems and our goal is to avoid problem or complications of any type for our bankruptcy clients.
Advise Our Law Firm of any Balance Transfers Within the Past Year
If you have already undertaken a balance transfer, all hope is not lost, but we need to be aware of the recent transfer when you meet with our staff. Specifically, we need to know when you processed the transfer and what you did with the money.
The Bankruptcy Code provides that debt incurred with no expectation of repayment may be held to be non-dischargeable. In other words, if you transferred $10,000 from a Citibank Visa to a Chase Mastercard, Chase could take the position that at the time of the transfer you were “insolvent” and that your budget did not have enough disposable income to pay back the debt to Chase. Click on the link to read a helpful bankruptcy blog post about discharge issues arising from credit card balance transfers.
In addition, if the transfer occurred less than 3 months prior to filing for your bankruptcy, the payoff to Citibank could be considered a “preferential transfer.” In certain circumstances, trustees have the right to recover these preferential transfers (i.e. in our example, get the money back from Citibank). You can read more about this preferential transfer issue here.
Since your goal in filing bankruptcy should be to eliminate as much debt as you can without problems, the last thing you would want to see is a challenge to your bankruptcy case.
As a matter of strategy, we may advise you to hold off on filing for a few months and to make “good faith” payments during these few months. We ma also decide that your need to file is immediate and we will have to take our chances with the trustee.
In any case, our law firm can offer you the best advice if we have a full picture of your situation. Information about balance transfers is essential to our proper representation of you.
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