It is important to emphasize that  if you plead guilty to a criminal charge involving fraud, a document from the court showing your conviction may be all that’s necessary to convince the judge to rule the debt non-dischargeable.
The fact that the creditor has the burden of proof doesn’t mean that you should do nothing and blow off an adversary case. You should be prepared with proof of your own to show that the creditor’s allegations in the complaint are not true.
24. What are the most common ground for a creditor to object to the discharge of a debt on my bankruptcy?
The vast amount of adversary cases are filed by credit card companies. Â There are few specific rules about what constitutes credit card fraud in bankruptcy. The bankruptcy courts are review following factors to determine fraud:
- Timing. A short time between incurring the charges and filing for bankruptcy may suggest a fraudulent intent.
- Manipulation of the system. Incurring more debt after consulting an attorney may lead a judge to conclude that you ran up your debts in anticipation of your bankruptcy filing.
- Amount. As mentioned earlier, recent charges over $550 for luxuries will be presumed to be fraudulent.
- Crafty use of the card. Multiple charges under $50 (to avoid preponderance of the charge by the credit card issuer) when you’ve reached your credit limit will start to look a lot like fraud.
- Deliberate misuse. Changes after the card issuer has ordered you to return the card or sent several “past due†notices don’t look good.
- Last-minute sprees. Changes in your pattern of use of the card (for instance, much travel after a sedentary life), charges for luxuries, and multiple charges on the same day could lead to problems.
- Bad-faith use. Charges made when you were clearly insolvent and wouldn’t be able to make the required minimum payment (for instance, you had lost your job and had no other income or savings) are a no-no. Banks claim that insolvency is evidenced by any of the following,
- A notation in the customer’s file that the customer has met with an attorney’ (perhaps because the customer told the creditor he or she was considering bankruptcy and had talked to an attorney about it).
- A rapid increase in spending, followed by 90 days without activity.
- The date noted on any attorney’s fee statement, if the customer consults a lawyer for help with a bankruptcy.
It is important to emphasize that the mere fact that a credit card company challenges your discharge of a credit card debt doesn’t mean the creditor will win in court. In most of these cases, these cases are settled for 20% to 30% of the amount of the disputed credit card debt. It is very time consuming to litigate an adversary case. Moreover, if the credit card company wins the adversary case, they still have to file yet another lawsuit in the civil courts to collect their money. Therefore, in the vast majority of the adversary cases that I have handled, I have been able to settle with the credit card company for 10% to 30% of the disputed debt.