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Cash Advance and Bankruptcy

How Cash Advance and Bankruptcy Work

When money is tight, a cash advance can help get you through. But cash advance and bankruptcy sometimes don’t play well together. Special rules apply to cash advance in bankruptcy. Sometimes you need to wait until 70 days have passed from your cash advance before you file your bankruptcy case. But sometimes you don’t have to wait. I see cash advance and bankruptcy every day. Here’s what you need to know.

Automatic Stay

Recent Cash Advance Special Rule

You’ll not want to file bankruptcy until after 70 days from your last cash advance it it totals more than $1,000. This amount changes every few years. The $1,000 is current through 3/31/22. More rules apply, however.

Is the advance used for consumer purposes? Normally you use these advances to pay living expenses, or sometimes other bills. These are consumer purposes. This is one commonly seen use of advance and bankruptcy.

Did the cash advance total more than $1,000? For this special rule to apply, the advance would have to total more than $1,000. Because of this rule, you could get two advances for $999, and the rule would not apply.

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The Non-discharge Cash Advance Rule is Easy to Avoid in Bankruptcy

The rule is designed to catch you if you try to “run up your debt” before filing bankruptcy. I’ve been filing bankruptcy on advances for over 30 years. In my experience, almost none of my clients ever try to do this. It just doesn’t happen.

What’s more, the rule is easy to avoid. We ALWAYS ask if there have been any recent cash advances. If so, we just wait it out. Occasionally we have to file before the 70 days is up. What happens then? Does the bankruptcy get dismissed? NO.

So far, in over 30 years, NOTHING has ever happened in a case I have filed where we could not wait 70 days. Sometimes we need to stop a sheriff sale. Or perhaps we need to stop a car repossession. This doesn’t mean it won’t someday happen to the consumer who files before the 70 days run after getting a cash advance. The circumstances would need to warrant the creditor taking action.

Different Rules Apply to Luxury Goods and Services

If you are doing your internet research, you may read about special rules for luxury goods. This is different from the cash advance rule. Luxury goods are things that you don’t really need for daily living. They include the things you would expect. The court would look at the circumstances and the expenditure. If you try to mix luxury goods, purchased with cash advance and bankruptcy, this is a bad mix.

For example, medical expenses are not luxury goods, normally. A trip to the emergency room for a broken arm, or the dentist for a toothache would be considered normal consumer expenses. But a Botox injection for your lips, or a cosmetic teeth whitening treatment would likely be considered luxury expenses. More cash advance and bankruptcy mistakes here.

The luxury goods and services rule only applies if you are charging the goods or services on credit cards.

When you’re thinking about bankruptcy and looking into the different options for debt relief, think about your recent charges or cash advances and ask your attorney about them. It’s very helpful to get the advice of a certified specialist in this area to avoid being sued in your bankruptcy.

Richard West is trained, and certified and experienced in all debt relief options. He’ll make sure you know what not to do, as well.

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