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Bankruptcy Abuse – Spending

Chapter 7 Abuse Debts
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Abusive spending is not a circumstance to file for Chapter 7 bankruptcy.  You cannot abuse bankruptcy rules with excessive spending.   A wife’s spending was not considered discretionary spending   https://www.investopedia.com/terms/d/discretionary    A wife’s spending spree leads to a debt that is not discharged in bankruptcy.

Background:

  • Husband and Wife had a joint account with a limited credit line.
  • Bank made error and increased the allowable credit limit to $100,000.
  • Wife took full advantage of the situation and began to go on a spending spree; charging in excess of $80,000.
  • Husband had no knowledge of the situation at the time.
  • Wife handled all the finances.
  • When the bank demanded this money be paid back through a payment plan, wife informed husband of the situation.
  • Couple filed for Chapter 7 bankruptcy.
  • Bank filed an adversary proceeding.

Court Ruling

  • Although the bank made an error in the credit limit, the bank was not responsible.
  • Wife was fully aware of the situation and took advantage; regardless of the fact that the husband was unaware.
  • Debtor-wife’s obligation to the bank is a non-dischargeable debt.
  • Exploiting a situation and knowingly taking advantage is unacceptable to a Bankruptcy Court.
  • Debt was not allowed in the bankruptcy.

Remember not all debts are dischargeable in Chapter 7 bankruptcy.    Abuse of the bankruptcy rules and code is not acceptable to the Bankruptcy Courts.

I remind clients that honesty and coming to the bankruptcy court in good faith is essential  https://njbankruptcylawfirms.com/drs-wife-diverts-funds-to-herself-and-files-bankruptcy/.   You cannot have excessive spending in bankruptcy.    The Debt will not be dischargeable.