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Inclusion of certain debts in a Chapter 13 plan often causes problems. In particular, cash advances
and purchases of luxury items within the 30 days preceding the file date of the original petition
create a particularly pesky problem. Expect a Chapter 13 bankruptcy cash advance
to cause suspicion, and the perhaps an objection when
the court considers confirmation. Any creditor may file a motion
objecting to confirmation, appear in court, and demand repayment of
unauthorized cash advances.
The intent of the statutory prohibition limiting cash advances is to
prevent debtors from drawing down all available credit card limits from
ATM cash withdraws. These types of transactions arrive fairly close to
the definition of "intent to defraud creditors." Conversely, credit card
purchases for normal expenditures (i.e. groceries, gas, utility bills)
are seldom questioned.
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