If you are struggling with debt it is quite normal to first try and resolve the problem by continuing to borrow more money which you use to keep up the payments towards other debts. The issue with this strategy however is it very often just makes the situation worse.

Very often you continue to use credit cards and overdraft facilities because there is simply no other money left to pay for food and other living expenses.

This situation means that more often than not you may have continued to use credit facilities right up to time that you get advice about your debt problem and decide to go Bankrupt. Given this we consider whether you can declare bankruptcy immediately after you have stopped using credit or whether it is best to wait.

Is it fraud if I go Bankrupt just after using my credit card?

If you have been borrowing more money to try and keep on top of your debt repayments this is not a sensible thing to have done. However you have almost certainly not committed an act of fraud.

If you continued to use your credit cards to fund your living expenses but had every intention of repaying the balances this is not fraudulent.

However, as soon as you are aware that you are insolvent and have no hope of repaying the debt that you owe, you should try to minimise any further losses incurred by your creditors. This means that you should stop further borrowing straight away.

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What if I have made a preferential payment before Bankruptcy?

If you pay off one of your debts just before you declare yourself bankrupt this will normally be viewed as a preferential payment. In other words you have used funds under your control to pay off one of your creditors over and above any of the others you owe money to.

Preferential payments are relatively common. For example you could take a personal loan or use your available credit card limit to withdraw cash and repay another debt – perhaps an outstanding balance to a friend or family member.

However, if you declare yourself bankrupt within 5 years of making a preferred payment, the official receiver has the power to claw back the money you have paid so that it can be shared equally between all of your creditors.

BMD Tip: Simply maintain the normal monthly repayments towards your debts is not generally seen as making a preferential payment. The issue occurs where you have paid of one or more debts in full and left others to be included in your Bankruptcy.

Can I borrow to pay my Bankruptcy fees?

The one issue that most people face once they have decided to go Bankrupt is how to pay for the court fee required which in England & Wales currently stands at £705 per person. The bankruptcy fee increased in April 2014 to £705.

One option is to save your disposable income for a number of months instead of paying your creditors. However an alternative solution is to borrow the money.

If you have available credit on a credit card you could draw cash from this to pay the Court fee. Of course doing this could mean that you use your card just before you go to the Court. However the Court will normally not penalise you for doing this. At the end of the day you have borrowed just a little more to ensure that the overall debt problem is resolved and prevented from becoming worse.

Recently using credit is no reason to delay your Bankruptcy application

Once you have decided to declare yourself bankrupt, other than getting the required fee together, there is no reason why you should not start the process straight away if you want to.

As with any other debt management solution you do not have to wait for a certain period of time between last using credit and starting the solution.

However, as soon as you realise you are unable to repay your debt, you should no longer use credit cards or other forms of credit for general living expenditure purposes.