How does a cash advance affect filing for bankruptcy?

If you’re thinking about getting a cash advance to get you through a rough spot, or if you’ve recently taken a cash advance out–please read this post so you’ll understand how that money might affect you in the event that you consider filing for bankruptcy.

I think most of us agree that cash advances are for when times really get tight. You may get a cash from your credit card to pay for expenses between paychecks, or to cover life’s (unpleasant) surprises. Sometimes, as much as we know we shouldn’t, we decide that cash advances are a necessary evil?

Wrong.

First, there is the straight consumer lawyer perspective–Interest on that cash advance is guaranteed to be astronomical and it’s calculated from the moment you put your hot little hand on the Benjamins out of the ATM.

This is unlike ordinary credit card charges where you get a “grace” period between the time you charge and your statement (unless you’re already in trouble with the credit card lender–if that’ the case you’re probably paying interest on those ordinary charges as they occur.)

Second, there is the bankruptcy attorney perspective–If you’re in dire straights, and are considering filing bankruptcy, consider this:

Cash advances that you take within 70 days of filing your bankruptcy petition are presumed to non-dischargeable. That means if you file bankruptcy and you’ve taken cash advances, you might be on the hook for them (and you may open yourself to being challenged by the Trustee or other creditors about the dischargeablity of other debts).

The creditor who you took money from may or may not challenge you. You need to talk to an attorney who can explain the risks to you and help you determine if other factors outweigh the threat.

This is different than ordinary credit card transactions, which are arguably dischargeable up to the day you decide that you start seriously considering bankruptcy as a solution.

The bankruptcy code is literally jam packed with other exceptions. Hire an attorney who cares enough to take the time to listen to you and guide you through the rubicon.