Bankruptcy Abuse – Spending

Abusive spending is not a circumstance to file for Chapter 7 bankruptcy. 

You may not abuse bankruptcy rules through excessive spending.   A wife’s spending was not deemed discretionary.  A wife’s spending spree results in debt that is not discharged in bankruptcy.

Here is what happened:

• Husband and Wife had a joint account with a limited credit line.
• The bank made an error and increased the allowable credit limit to $100,000.
• Wife took full advantage of the situation and began a spending spree, incurring charges in excess of $80,000.
• Husband was unaware of the situation at the time.
• Wife handled all the finances.
• When the bank demanded that this money be paid back through a payment plan, the wife informed the husband of the situation.
• The couple filed for Chapter 7 bankruptcy.
• The bank filed an adversary proceeding.

Result in Bankruptcy Court:

• Although the bank erred in the credit limit, it was not responsible.
• The wife was fully aware of the situation and took advantage of the husband’s unawareness.
• 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 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 are essential.   You may not incur excessive expenses in bankruptcy.    The Debt will not be dischargeable.