Holiday Credit Card Charges Before Bankruptcy in DC: The 90-Day Presumption

The decision to file bankruptcy is usually made months before the petition. In the District, where the holidays bring family from out of town, office gift exchanges, and a December that costs more than any other month, the gap between the decision and the filing often fills up with new charges on cards the filer expects never to pay. The Bankruptcy Code anticipated that, and the rule it contains is the most common reason an otherwise routine DC Chapter 7 produces a lawsuit inside the case.

Credit card debt is dischargeable, with one exception that matters here

Credit card balances are unsecured consumer debt, and a Chapter 7 discharge eliminates them. The Code does not carve out large balances, balances run up on things the filer did not need, or balances built while the filer knew the end was coming. The exceptions in 11 U.S.C. § 523(a) are specific. The relevant one is § 523(a)(2), which excepts from discharge any debt obtained by false pretenses, a false representation, or actual fraud.

A creditor who wants to use that exception files an adversary proceeding in the bankruptcy case and carries the burden of proving fraud. For an ordinary balance, the cost of the suit exceeds the recovery, and card issuers rarely file. The presumption in § 523(a)(2)(C) is what changes that calculation.

The two presumptions

Under § 523(a)(2)(C)(i), two kinds of recent debt are presumed nondischargeable. The dollar figures are adjusted every three years under § 104; the current ones took effect April 1, 2025 and run to April 1, 2028.

Luxury goods or services. Consumer debts to a single creditor aggregating more than $900 for luxury goods or services, incurred within 90 days before the order for relief, which in a voluntary case is the petition date.

Cash advances. Cash advances aggregating more than $1,250 under an open-end credit plan, obtained within 70 days before the order for relief.

Section 523(a)(2)(C)(ii)(II) defines luxury goods or services by what they are not: goods or services reasonably necessary for the support or maintenance of the debtor or a dependent. Groceries, the Pepco bill, a Metro card, prescriptions, and a child's winter clothing are not luxury goods on any card.

What the presumption changes

A presumption shifts the burden of proof. Without it, the creditor proves fraud. With it, the creditor shows the dollar amount and the dates, and the filer must prove the charges were made with intent to pay or were necessities. The creditor still has to file the adversary proceeding, by the deadline of 60 days after the first date set for the meeting of creditors. A creditor that does not file sees its claim discharged with everything else. But the presumption makes filing cheap, and the issuers' systems check every account in a new case for charges inside the windows.

Outside the windows is not outside the exception

The 90 and 70 day windows define the presumption. They do not limit the ordinary fraud exception in § 523(a)(2)(A), which a creditor can bring on charges from four or five months before filing if it is willing to prove the case. The factors courts weigh include how close the charges were to the petition, whether the filer had already consulted a bankruptcy attorney, whether the filer was employed and could have paid, whether the charges departed from the account history, whether any payments followed, and whether the purchases were the kind a person intending to pay would make. A long-dormant card used for $3,000 in December, with no payment, followed by a February petition, is a fraud case with or without the presumption.

The District's exemption picture

In the District a filer chooses between the exemptions in D.C. Code § 15-501 and the federal exemptions in § 522(d). The federal household goods exemption, $800 per item and $16,850 in aggregate, is generous enough that a holiday electronics purchase is usually exempt as property. The DC schedule, $425 per item and $8,625 in aggregate under § 15-501(a)(2), is tighter, and a filer who needs the DC homestead exemption for a house with equity and therefore cannot take the federal set may find that a $1,200 television is both a presumption problem and an asset the trustee can claim.

If the charges are already made

Wait. The presumption has an expiration date. Charges made November 15 are outside the 90-day window for any petition filed after February 13. Cash advances age out after 70 days. Waiting does not eliminate the ordinary fraud exception, but it removes the burden shift, and without the burden shift most issuers do not sue. The cost of waiting is whatever the creditors do in the meantime.

Pay the charges down. Payments after the purchase are evidence of intent to pay and reduce the amount in dispute. Bringing one creditor's 90-day charges under $900 takes that creditor outside the presumption. Preference rules under § 547 are not a practical concern at these amounts, given the $600 consumer floor in § 547(c)(8) and the ordinary-course defense.

Keep the receipts for necessities. A December charge for tires, a furnace repair, a prescription, or the gas bill is outside the definition of luxury goods, and a creditor's attorney who sees the receipts will usually not file.

Consider Chapter 13. Under § 1328(a)(2), the § 523(a)(2) exception applies in Chapter 13 too, but the recent charges are paid through the plan with the other unsecured claims and the creditor's incentive to litigate is lower.

What makes it worse

Returning goods for store credit and recharging them. Taking a cash advance to pay the attorney's fee, which is the one use of a cash advance that every trustee and every creditor's lawyer knows to look for. Moving the balance to a new card, which creates a new debt to a new creditor with a December date. Using the card after the last payment. Our post on what not to do before filing bankruptcy in DC covers the broader list, and credit card debt in Chapter 7 covers the normal treatment of card balances.

Frequently asked questions

Is the $900 counted per card or per creditor? Per creditor. Two cards issued by the same bank are added together.

Are gift cards luxury goods? Courts look at what the gift card buys. A grocery gift card for a relative is a necessity. A department store gift card given as a present is not.

Holiday travel to see family? Travel is the example the statute's drafters had in mind. Some courts have treated funeral or caregiving travel differently, but expect to explain it.

I used the card for my business. The presumption applies only to consumer debts. Business charges are outside it, though the ordinary fraud exception remains available.

Before deciding whether to file in the first quarter or wait for the windows to close, the free DC means test calculator takes about three minutes and shows whether Chapter 7 is realistic before you pay for a consultation.