Can you spend money during bankruptcy?

On Behalf of | Nov 8, 2022 | debt relief |

You’ve never declared bankruptcy before, but you finally made the decision to do it. You know that it’s going to help you because you need to clear up some of these debts so that you can have a successful financial future.

When you mention to someone else that you’re thinking of doing this, they may tell you that you should file for bankruptcy and spend as much money as you want. Maybe they encourage you to max out your credit cards, for example. If the debt that is on those cards it’s about to be discharged anyway, why wouldn’t you want to use them to the maximum level before having the debt forgiven? 

But you may need to reconsider your choices – here’s what you should know:

Bankruptcy fraud

Spending during bankruptcy is a bit of a tricky subject. The example above is simply bankruptcy fraud, and it could cause your case to get thrown out. You cannot spend recklessly or far above your normal levels just for the sake of discharging it in bankruptcy. Bankruptcy is a financial tool that you can use, but doing this would be an abuse of that system and so it is prohibited

That being said, you don’t have to worry about spending some money during bankruptcy. Bankruptcy can take months to complete. It’s fully understandable that you’re still going to have bills. 

You still have to pay the rent, buy food, pay the utilities and much more. This type of spending is likely fine, and some of it may even be eliminated during the bankruptcy case. But it may not be fraud because this is just your standard spending and it is necessary.

Getting the process started

If you have any questions about how this process works, what mistakes to avoid and other things of this nature, it may be  important to learn as much about the legal process as you can in advance.