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We have seen recent discussions regarding whether a recent graduate can pay his or her student loan with a credit card, then file for bankruptcy and discharge the debt as an unsecured credit card debt. While this strategy may seem like a good plan for circumventing the bankruptcy rules, below are 2 main reasons why it is a bad idea:

  • Credit card fraud is a crime. Credit card companies have vast experience in detecting fraudulent activity, especially in bankruptcy filings. It is likely you have had a charge flagged on your card because it appeared “suspicious” to your card issuer. Just think of what paying off your student loans might trigger! If your credit card company determines that any of your charges were fraudulently made with the intent to discharge them in bankruptcy, you could not only be held responsible for paying all your credit charges in full, but also possible criminal charges.
  • Interest rates. The annual percentage rate of interest on your credit card is most likely higher than the rate on your student loan. If you pay your student loan with your card and do not intend to file for bankruptcy, you have made a very poor financial choice. It does not make sense to trade out one debt for another that is even worse.

Bankruptcy is a complex process. If you are considering seeking Chapter 7 or Chapter 13, it is important to meet with an experienced attorney to discuss your debts, whether you qualify for a Chapter 7 and how the bankruptcy will benefit you financially. To learn more, call Levitt & Slafkes today. If you are interested in learning how filing a bankruptcy case can benefit you, contact Levitt & Slafkes, P.C., at 973-323-2953. You can also reach us by filling out our online form. We represent debtors in Chapter 7, Chapter 13 and Chapter 11 filings. Let us help you get the fresh financial start you need today.