Cash Advances and Bankruptcy

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Written by Andrea Wimmer, Esq.  
Updated January 6, 2020

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A cash advance is exactly what it sounds like. Someone gives you cash, you pay it back. There are a variety of different forms of cash advances, but they all have this in common. You get cash in a certain amount. You pay it back with interest. 

Getting a cash advance right before filing bankruptcy is a big red flag for a couple of reasons: 

  1. What did you do with the cash you took? Do you still have it and if so, is it protected by an exemption? If not, what did you do with it? Is what you purchased with it exempt? 

  2. Turning your last remaining available credit into cash right before filing suggests that you never intended to pay it back in the first place. Incurring debt knowing that you’ll never pay it because you’ll file bankruptcy is a form of bankruptcy fraud

What does it mean - it’s bankruptcy fraud? 

The bank that you got the cash advance from can ask the court not to eliminate this debt when your discharge is granted. In that case, you’ll still be responsible for paying it back in full, interest and all. 

If you take a cash advance in the 70 days before filing your case, then a presumption arises that you did it knowing that you won’t be able to pay back the cash advance, just like it does if you purchase luxury items in the 3 months before filing. That means it’s on you to prove to the court that you didn’t do anything wrong. 

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If you’ve had a cash advance in the last 70 days, it’s best to speak to an attorney before you file to make sure you understand the risks. 

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