Legal Question in Bankruptcy in Massachusetts

Are interest charges and late charges considered ''luxury goods or services'' un

Section 523 exempts out any amounts over $1,075 for luxury goods and services to a single creditor. My question is whether that includes late charges and interest charges. D owes C $2000.00 on a credit card for luxury items. Payment is not made for a substantial period of time and the amount now owed by D to C is $5000.00 although there have been no further purchases on the card. If D was to file for Bankruptcy protection, would the amount of relief be limited to $1,075 or would it be $1,075 of the initial $2000.00, as well as a discharge of the interest and late charges?

Thank You.


Asked on 1/03/02, 4:49 pm

1 Answer from Attorneys
Robert Trant Law Office of Robert R. Trant

Re: Are interest charges and late charges considered ''luxury goods or services'

The part of section 523 you reference in your example covers new purchases of luxury goods or services made within 60 days of filing for bankruptcy. The reason is to prevent a debtor from "running up the tab" and then filing a Chapter 7 to discharge the debt. Also, the debt is presumed to be non-dischargable unless it is incurred for maintenance or support of the debtor or debtor's dependent. The debtor is entitled to present evidence that the charge was used for maintenance or support. A court would then rule on whether or not the debt is dischargeable.

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Answered on 1/03/02, 5:46 pm


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