In the case, the credit card issuers sought to determine that the Chapter 7 debtor’s cash advances were nondischargeable.

Here, debtor incurred more than $11,000 in cash advances on his Chevy Chase Visa card and another $5,000 on his Citibank credit card within ten months prior to filing for bankruptcy. The debtor was current with his payments on each account at the time the bankruptcy was filed.

At the time the cash advances were incurred, debtor was unemployed, had no income and was living off his savings.

The bankruptcy court noted that a debt may be excepted from discharge if a debtor obtains money under false pretences, false representation or actual fraud. In determining whether a debtor intends to pay credit card charges, the courts have considered factors such as:

1) the length of time between the charges and the filing of bankruptcy;

2) whether an attorney had been contacted concerning the bankruptcy and prior to the bankruptcy filing;

3) the number and amount of charges incurred; and,

4) whether the debtor was employed or his financial situation had changed.

In this case, the court found that debtor was unemployed when the cash advances were incurred, debtor could not afford to repay the cash advances when charged, debtor was living off his savings, and the cash advances obtained constituted an attempt to obtain money by fraud and, therefore, were nondischargeable debts. Chevy Chase Savings Bank and Citibank v. Edward McCubbin, 156 B.R. 94.

Author: Charles R. Harroun, Attorney at Law