Bankruptcy

Bankruptcy Debtor's Plan To Convert Credit Card Debt To Cash

By Jonathan Alper

Most people who file bankruptcy do so reluctantly and as a last resort; most bankruptcy debtors are honest people who would pay back every penny if they could afford to do so. Most of my clients feel horrible and ashamed about bankruptcy. And then, there are people who use bankruptcy to make money and wring every dollar they can from their lines of credit and credit cards.

Here?s this week?s bankruptcy scam-plan. A client consulted me about a future bankruptcy filing. I told him he had to postpone bankruptcy because his recent repayment of a loan created a creditor preference issue. Since he had to delay bankruptcy anyway, he asked me about his plan to make the most of it. He would use his untapped credit cards to buy department store gift cards. He did not want to use the cards to shop at department stores. What he planned to do is to sell the gift cards for cash, at a discount, over a web-based gift card market. He would run up credit cards to their limit to buy the gift cards, sell the card for cash, and put the cash in his pocket. Then, he would wait several months until the credit charges "aged" before he would wipe out the credit cards in a bankruptcy. The cash, of course, would not be disclosed. Pretty slick.

Naturally, I told this person that I could not be the attorney who would file his bankruptcy knowing what I know. Nor, could I advise him about his plan because I can not help him steal money from banks. When it comes time he?ll find another attorney for the bankruptcy and disclose nothing about the gift card purchases or the cash, and the truth is he?ll probably get away with it.

There are creditors who abuse honest debtors, and then there are debtor who cheat the banks. There are bad actors on both sides. Its not bankruptcy, its not banks, its just people.

Full post as published by Florida Bankruptcy Law on January 19, 2010 (boomark / email).