Is it legal to obtain a loan and then declare bankruptcy soon after? 28 Answers as of June 20, 2013

I'm interested in filing for bankruptcy due to high debt. Would it be legal to get into more debt by requesting a loan and then filing for bankruptcy? Or will it be looked down upon because of purposeful intentions?

Ask a Local Attorney. 100% Anonymous. Free Answers.

Free Case Evaluation by a Local Lawyer: Click here
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
That is called bankruptcy fraud.
Answer Applies to: California
Replied: 1/31/2012
Ross Smith, Attorney at Law
Ross Smith, Attorney at Law | Charles Ross Smith III
The loan you propose would be nondischargeable in bankruptcy and could be considered bankruptcy fraud. It is also fairly likely that the Court would refuse a discharge on all of your debt, if the prebankruptcy misconduct was of hign enough dollar value. Please, go see an attorney. There is often no charge for the initial consultation. Good luck.
Answer Applies to: Ohio
Replied: 1/30/2012
CONSUMER PROTECTION ASSISTANCE COALITION, INC. (DE).
CONSUMER PROTECTION ASSISTANCE COALITION, INC. (DE). | Gary Lee Lane
No.
Answer Applies to: California
Replied: 5/30/2013
Bankruptcy Law office of Bill Rubendall
Bankruptcy Law office of Bill Rubendall | William M. Rubendall
Debts incurred on the eve of bankruptcy are presumptively fraudulent and nondischargeable.
Answer Applies to: California
Replied: 1/30/2012
Steven Harrell, Attorney at Law | Waymon Steven Harrell
If the loan was obtained within 90 days of your bankruptcy filing, your debt is presumed to be fraudulent in nature, and would not be discharged in a Chapter 7 filing.
Answer Applies to: Georgia
Replied: 1/27/2012
    Philip R. Boardman, Attorney at Law
    Philip R. Boardman, Attorney at Law | Phil Boardman
    That is highly discouraged. In fact, any debt that is incurred within 90 days can be challenged in court by the creditor. As a practical matter, smaller (less than $500) charges usually are not challenged.
    Answer Applies to: Virginia
    Replied: 1/27/2012
    Heupel Law
    Heupel Law | Kevin Heupel
    It wouldn't be a good idea. The creditor can object to the discharge of the debt. It's never a good idea to play the system.
    Answer Applies to: Colorado
    Replied: 1/27/2012
    Mercado & Hartung, PLLC
    Mercado & Hartung, PLLC | Christopher J. Mercado
    You will have a hard time proving you intended to repay the loan, avoid doing this.
    Answer Applies to: Washington
    Replied: 1/27/2012
    Albert Law Group
    Albert Law Group | Alvin S. Albert
    It would be considered fraud, which you appear to suspect by the tone of your question. The trustee can look back up to one year for these kind of transactions and the lender would most likely object to discharging the debt.
    Answer Applies to: Georgia
    Replied: 1/26/2012
    Gregory J. Wald, Attorney at Law
    Gregory J. Wald, Attorney at Law | Gregory J. Wald
    It depends on the situation. If you take out a car loan with the intention of continuing payments and keeping the vehicle, its not a problem. Just keep making the payments after the bankruptcy or in some cases reaffirm and formally agree to repay the debt. But, if you borrow money with the intention of not paying it, that is fraud. Fraudulently incurred debts are not dischargeable in bankruptcy. In other words, you can't eliminate them.
    Answer Applies to: Minnesota
    Replied: 1/26/2012
    The Law Office of Jill Rose Quinn | Jill Rose Quinn
    It's fraud and punishable with a fine and or imprisonment.
    Answer Applies to: Illinois
    Replied: 1/26/2012
    Paul Stuber, Attorney at Law
    Paul Stuber, Attorney at Law | Paul Stuber
    That is considered fraud and you should not do it.
    Answer Applies to: Colorado
    Replied: 1/26/2012
    Moore Taylor Law Firm, P.A.
    Moore Taylor Law Firm, P.A. | Jane Downey
    That sounds like fraud.
    Answer Applies to: South Carolina
    Replied: 6/20/2013
    Weber Law Firm, P.C.
    Weber Law Firm, P.C. | William Weber
    Don't do it. Don't even think any more about it. This conduct would be considered bankruptcy fraud. Not only would the debt in question be rendered non-dischargeable, all debts owed by the debtor might be declared non-dischargeable (not only the debts incurred close to the bankruptcy filing). Finally, this conduct might be considered a criminal violation (a felony), and subject the bankruptcy debtor to 5 years imprisonment in a federal prison.
    Answer Applies to: Texas
    Replied: 1/26/2012
    Law Office of Lynnmarie A. Johnson
    Law Office of Lynnmarie A. Johnson | Lynnmarie Johnson
    Any loan gotten within 90 days of filing is subject to either the creditor or the bankruptcy trustee calling fraud, and you would have to pay it back, and/or could go to prison and/or have to pay a penalty. Sometimes it can be allowed because it was for food, shelter, etc, or if suddenly things change so fast that you had no idea at the time that you might have to file bankruptcy. I have had one creditor go after a debtor after 3 years, saying you lied on your application, you knew you didn't make that much money. So I would strongly advise you not to even try and obtain a loan when you know you are about to file bankruptcy.
    Answer Applies to: Michigan
    Replied: 1/26/2012
    The Schreiber Law Firm
    The Schreiber Law Firm | Jeffrey D. Schreiber
    It would be looked at as making promise (to repay the loan) without any intention to perform, which is fraud. Debts incurred by fraud are not dischargeable in bankruptcy.
    Answer Applies to: California
    Replied: 1/26/2012
    Bird & VanDyke, Inc.
    Bird & VanDyke, Inc. | David VanDyke
    Taking out a loan without the intent to pay it back is fraud. Do not do it.
    Answer Applies to: California
    Replied: 1/26/2012
    Law Office of Bijal Jani | Bijal Jani
    Securing a loan and then filing bankruptcy soon thereafter could really land you in some deeper problems because the creditor(s) may be able to effectively claim against you that you intentionally and purposely engaged in actions that would be considered to be misrepresenting your intentions to repay your financial obligations. These claims may even result in your bankruptcy filing being rejected by the Court. That being said, there are options available to help you resolve your debt situation, and you should consult with an experienced attorney who can discuss with you the specific debts and the best options for you rather then just taking out another loan and increasing your financial crisis.
    Answer Applies to: New York
    Replied: 1/26/2012
    The Law Office of Darren Aronow, PC
    The Law Office of Darren Aronow, PC | Darren Aronow
    The creditor that you get a loan with is likely to file a non dischargeability action which if they win, means that loan will survive bankruptcy and still be due.
    Answer Applies to: New York
    Replied: 1/26/2012
    Law offices of John P. Brooke | John Brooke
    It all depends on the amount of the loan taken out, the length of time that has passed, if you made payments on the loan and what you did with the money. It is impossible to say without knowing the details but it may very will be that you may need to wait to file for a chapter 7. If the debt is not dischargeable the creditor would file an adversary proceeding and you would not be able to discharge the debt, or worse, the bankruptcy can be deemed a bad faith filing and you may be denied a discharge.
    Answer Applies to: New York
    Replied: 1/26/2012
    J.M. Cook, P.A. | J.M. Cook
    The lender could and would move for the debt to be nondischargeable. Also, the trustee could file an objection to your discharge all together. This is simply an awful idea.
    Answer Applies to: North Carolina
    Replied: 1/26/2012
    Law Office of Stephen P. Dempsey
    Law Office of Stephen P. Dempsey | Stephen P. Dempsey
    I would advise you not to obtain any loans or incur debts while intending to file bankruptcy.
    Answer Applies to: New Jersey
    Replied: 1/26/2012
    Ashman Law Office
    Ashman Law Office | Glen Edward Ashman
    You're talking about fraud. That's ground to not only deny a discharge but if done deliberately could even involve prison.
    Answer Applies to: Georgia
    Replied: 1/26/2012
    Law Office of Louis S. Haskell
    Law Office of Louis S. Haskell | Louis Haskell
    It would be considered bankruptcy fraud. The debt would not be discharged. Your whole petition might be denied, and you could face criminal prosecution. Think about it logically. You are borrowing money knowing that you are not going to pay it back. What makes that different from stealing? The Judges and Trustees in the Bankruptcy Court see that as worse than stealing, as it is a fraud against them too. Do not do this. Bankruptcy is a very powerful tool. I do not know how much debt you legitimately incurred, but Bankruptcy can often make most, if not all, of that debt go away. The term of art is that it will be discharged. All the Bankruptcy Court asks in return is that you not try to game the system.
    Answer Applies to: Massachusetts
    Replied: 1/26/2012
    Diefer Law Group, P.C.
    Diefer Law Group, P.C. | Abel Fernandez
    This would be looked upon as fraud. You cannot incur more debt that you do not intend to pay. When you do, it is intentional and non dischargeable under the bankruptcy laws.
    Answer Applies to: California
    Replied: 1/26/2012
    Law Office of Michael Johnson
    Law Office of Michael Johnson | Michael Johnson
    It could be determined to be bad faith.
    Answer Applies to: Florida
    Replied: 6/20/2013
    The Law Offices of Kristy Qiu
    The Law Offices of Kristy Qiu | Mengjun Qiu
    From the description you have given, it sounds 100% like bad faith. If your creditors contest the dischargeability of the loan, they will probably win, especially if you intend to borrow a large amount and file for bankruptcy within 6 months.
    Answer Applies to: Florida
    Replied: 1/26/2012
    Buff & Chronister, LLC.
    Buff & Chronister, LLC. | Curtis L. Chronister Jr.
    If the trustee assigned to your case determines that you created this debt with the intent to discharge it in bankruptcy, then this debt could be excepted from discharge. The creditor may also object to the discharge of the debt if the debt was created within the past 12 months; the shorter the time between the date you file for bankruptcy and the date the debt was created will dictate as to how the bankruptcy court may rule in regards to the dischargeability of the debt. If you file a bankruptcy pro se, just be aware of the repercussions for falsifying any document within your bankruptcy petition.
    Answer Applies to: Georgia
    Replied: 1/26/2012
Click to View More Answers:
12 3 4 5 Free Legal QuestionsConnect with a local attorney