Can I get into trouble with balance transfers?

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Can I get into trouble with balance transfers?

Transferring balances between credit cards can be a way to lower your minimum payments or to get a lower interest rate. When you do this, you’re actually paying off one debt and incurring a new debt. If you don’t have the present intention to pay the new debt (and if the creditor can prove you didn’t), that new debt could be found to have been fraudulently incurred, which would mean you couldn’t get the debt discharged in a bankruptcy.

Try to avoid using so-called “convenience checks” or other ways of borrowing on the new credit card to pay off the old cards. These “checks” are treated like cash advances. Cash advances within 60 days of a bankruptcy filing are presumed to have been obtained by fraud. Some bankruptcy courts have looked to see how the proceeds from the “check” were spent. These courts have then determined that obtaining cash in order to transfer balances is not fraudulent. There’s no guarantee that every bankruptcy court would reach the same result, however. Plus, you would have to carry the burden of proof to show that you intended to pay off the amount of the advance.

(Reviewed 11.14.08)

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