Cash Advances and Bankruptcy: 70-Day Rule in Texas

Cash advances are generally dischargeable in bankruptcy, but federal law creates a rebuttable presumption that aggregate cash advances over $1,250 taken within 70 days before filing are nondischargeable when they are extensions of consumer credit under an open-end credit plan. 11 U.S.C. § 523(a)(2)(C)(i)(II). Warren & Migliaccio, L.L.P. has guided Texas families through Chapter 7 cases since 2006, and the threshold rule is not as final as it sounds.

Warren & Migliaccio, L.L.P. is a Texas bankruptcy firm based in Richardson, serving Dallas, Collin, Denton, and Tarrant counties since 2006. Our team is Lead Counsel Verified, and we file cases in both the Eastern District of Texas (Plano Division) and the Northern District of Texas (Dallas and Fort Worth Divisions). If a recent cash advance has you worried about filing, call (888) 584-9614 for a free consultation.

What “Cash Advances and Bankruptcy” Actually Means in Texas

Most credit-card cash advances are unsecured consumer debt, just like a regular credit card balance. So in many Chapter 7 cases, the discharge under 11 U.S.C. § 727(b) eliminates them along with other unsecured debts, unless a creditor timely proves a discharge exception under 11 U.S.C. § 523(c)(1).¹ Recent ones are different. The Bankruptcy Code creates a special rule for cash advances taken close to your filing date, and that’s what really worries the people who Google this topic.

Here are the terms you’ll see throughout this article in plain English.

How a North Texas Bankruptcy Lawyer Evaluates Recent Cash Advances

So here is the contrarian piece, and it’s the part most online articles skip. A recent cash advance is not an automatic disqualifier. Federal law creates a presumption of nondischargeability under 11 U.S.C. § 523(a)(2)(C)(i)(II),² but a presumption only matters if a creditor actually uses it. It only matters if the creditor actually files an adversary proceeding, and only if they file it within the short window the rules give them. Most creditors don’t.

The Six Facts We Triage on a New Cash Advance File

When someone walks into our Richardson office worried about a recent cash advance, the first thing we do is run the same six-point check. In our experience handling consumer bankruptcy cases across Dallas, Collin, Denton, and Tarrant counties, these are the facts that actually determine the risk.

1. Date of the last advance. Does it fall inside the 70-day window before your planned filing date?
2. Aggregate amount per creditor. Is it over $1,250 to a single creditor?
3. Was it an open-end credit plan? Cash advances from a credit card qualify. Payday loans, cash app borrows, personal loans, and merchant cash advances generally do not. The mechanics are different.
4. What did you use the money for? Necessities are easier to defend than discretionary spending.
5. What is the creditor’s collection profile? National banks pursue adversary proceedings more aggressively than regional or specialty lenders.
6. What’s the urgency on the other side? Foreclosure sales, vehicle repossession, lawsuits, bank garnishment, or wage withholding allowed by state or federal law. These may justify filing now and defending the presumption rather than waiting. Tex. Civ. Prac. & Rem. Code § 63.004.

Why "Just Wait 71 Days" Is Incomplete Advice

Online articles tell debtors to wait 70 days and the problem disappears. In the cases we're filing this year, that advice falls apart for three reasons.

Waiting can mean a foreclosure sale, a vehicle repossession, a bank garnishment, or a qualifying wage withholding that costs more than the disputed cash advance. Texas generally protects current wages from garnishment for ordinary consumer debts. Emergency necessity (medical, rent, or a vehicle needed for work) can help rebut the presumption when documented before filing, but it is not a guaranteed defense. Tex. Civ. Prac. & Rem. Code § 63.004. And the good-faith requirement under 11 U.S.C. § 707(b)(3)³ applies on its own. A pattern of recent borrowing can raise dismissal risk even if no single transaction triggers the cash advance presumption.

Who This Helps and Who Needs Different Advice

We wrote this article for one specific reader. Here's whether that's you.

Best for:

• Texas consumers who took a credit card cash advance in the last 90 days and are considering Chapter 7 or Chapter 13
• Debtors weighing whether to wait or file under creditor pressure
• Anyone who used a credit card to cover medical bills, rent, or vehicle repair before filing
• Filers worried that one recent transaction will trigger dismissal or fraud findings

Needs different advice:

• Merchant cash advance recipients in business bankruptcy. That's a different doctrine, with preference rules and contract characterization questions that don't apply here.
• Debtors facing actual-fraud allegations under 11 U.S.C. § 523(a)(2)(A)⁴ for credit card spending. That's an intent-based analysis, not a timing-based one.
• Filers outside the Northern District of Texas. Local court practice varies, and the triage above reflects N.D. Tex. practice.

How the Cash Advance Presumption Works Under Federal Law

Now let's get specific about the rule itself. The Bankruptcy Code presumes that aggregate cash advances over the adjusted dollar amount, obtained by one consumer debtor from one creditor under an open-end credit plan within 70 days before the filing date, are nondischargeable.² The threshold adjusts every three years on April 1 under 11 U.S.C. § 104. As of the April 1, 2025 adjustment (effective through March 31, 2028), the cash advance threshold is $1,250.

The statute calls these adjustments "triennial," which is just a fancy way to say every three years. Good news for planning purposes is that the numbers are predictable. The next adjustment will hit April 1, 2028.

What Counts as a Cash Advance? (And What Doesn't)

The cash advance presumption is narrower than most online articles let on. It only applies to open-end consumer credit plans, which basically means revolving credit lines like credit cards.

This distinction matters. The same dollar amount of recent borrowing from a payday lender does not trigger the same presumption. To make a payday loan nondischargeable, the creditor would need to prove actual fraud under 11 U.S.C. § 523(a)(2)(A),⁴ which is a much higher burden than the timing-based presumption.

Cash Advances vs. Luxury Goods: Two Different Windows

The same section of the Bankruptcy Code creates a separate presumption for luxury goods bought on credit close to filing.⁵ It uses a different window and a different dollar threshold, and people mix the two rules up all the time.

For luxury goods, the court looks at whether the purchases were extravagant or non-essential. Items not reasonably necessary for the support or maintenance of you or your dependents fall under the luxury-goods rule. 11 U.S.C. § 523(a)(2)(C)(ii)(II). Things like jewelry, boats, vacations, sporting goods, spa treatments, designer clothes, expensive electronics, and elective procedures like cosmetic surgery have all been treated as luxury under this rule. Necessities are different. Food, reasonably-priced clothing, gas, and necessary legal fees are not luxury items. If you needed a car to get to work, that purchase is not luxury either.

One more clarifier that catches people. For cash advances, what the money was used for does not decide whether the 70-day presumption is triggered, though it can still matter when you present evidence to rebut the presumption. The luxury test only applies to charges placed on a credit card, not to cash you pulled from one. 11 U.S.C. § 523(a)(2)(C)(i)(II).

What Happens If a Creditor Actually Objects?

Now here's the part most articles gloss over. The legal term is "adversary proceeding." That's just a lawsuit filed inside your bankruptcy case. The creditor has a specific procedure to follow, and a tight deadline.

1. The creditor files a complaint under Federal Rule of Bankruptcy Procedure 7001(f),⁶ asking the court to declare the specific debt nondischargeable.
2. The complaint must be filed within the FRBP 4007(c) deadline,⁷ which is generally 60 days after the first date set for your § 341 meeting of creditors.
3. The presumption shifts the burden of going forward to you. The burden of persuasion still stays where the law puts it (this is a contested area, so talk to your attorney).
4. You present rebuttal evidence. Receipts showing necessity, medical records, emergency expense documentation, and income or expense records showing realistic intent to repay at the time of borrowing.
5. The court rules, usually after a brief evidentiary hearing.

Here's what we see case after case in the Northern District of Texas. Many adversary proceedings settle for partial nondischargeability, and many creditors abandon the proceeding outright when they calculate that the litigation cost is more than the disputed amount. The threshold is not the finish line for the creditor. It's the starting line, and most creditors never cross it.

Should You File Now or Wait?

So what do you actually do? The right filing date depends on weighing two clocks against each other.

The 70-day clock. Waiting more than 70 days from the date of your last cash advance eliminates the cash advance presumption, assuming the borrowing was open-end credit from a single creditor over $1,250.

The creditor-pressure clock. Foreclosure sale dates, vehicle repossession schedules, bank garnishments, wage withholding allowed by state or federal law, and pending lawsuits do not pause for your bankruptcy planning calendar. Texas generally protects current wages from garnishment for ordinary consumer debts. Tex. Civ. Prac. & Rem. Code § 63.004.⁸

Practical guidance:

• If the disputed cash advance is under $1,250 from a single creditor, the presumption doesn't apply. Waiting may be unnecessary.
• If the advance was open-end credit, over $1,250, within 70 days, and no urgent creditor action is pending, waiting 71 or more days is often the cleaner path.
• If creditor pressure outweighs the disputed amount, file now and prepare evidence to defeat any adversary complaint.
• If the borrowing pattern is broader than one transaction, talk to a bankruptcy attorney about good-faith risk before choosing a filing date.

If you want a sense of how often this comes up, there's an active thread on r/Bankruptcy where filers ask exactly these questions about the 70 and 90-day windows. The anxiety on that thread is the same anxiety most of our clients walk in the door with.

Mistakes to Avoid (And Bad Advice Online)

Search this topic online and you'll find five different answers. Most of them are wrong.

• Myth: "Wait 90 days and you're fine." The cash advance window is 70 days. The 90-day rule applies to luxury goods on a credit card, not to cash advances.
• Myth: "Any borrowing before filing is fraud." Actual fraud under 11 U.S.C. § 523(a)(2)(A)⁴ requires intent at the time of borrowing. Borrowing for necessity is not fraud just because bankruptcy follows.
• Myth: "Preferential transfers and the cash advance presumption are the same rule." They're different doctrines. Section 547⁹ (preferences) is about payments you made to creditors before filing. Section 523(a)(2)(C) is about debts you incurred before filing. Don't confuse them.
• Myth: "$750 is the threshold." That was the threshold years ago. The current amount is $1,250, and it changes every three years on April 1.
• Myth: "The creditor automatically wins." The creditor has to file an adversary proceeding within the FRBP 4007(c) deadline. Most don't.

Texas Statutes and Federal Provisions That Apply

• 11 U.S.C. § 523(a)(2)(C)(i)(II), the cash advance presumption (70-day window, $1,250 threshold)
• 11 U.S.C. § 523(a)(2)(C)(i)(I), the luxury goods presumption (90-day window, $900 threshold)
• 11 U.S.C. § 523(a)(2)(A), the actual-fraud nondischargeability rule (intent-based, no timing limit)
• 11 U.S.C. § 707(b)(3), the bad-faith and totality-of-circumstances dismissal rule
• 11 U.S.C. § 547, preferential transfers (a distinct doctrine, mentioned only to clarify the difference)
• Federal Rule of Bankruptcy Procedure 7001(f), governing adversary proceedings to determine dischargeability
• Federal Rule of Bankruptcy Procedure 4007(c), the filing deadline for § 523 complaints (generally 60 days after the first § 341 meeting date)
• Texas Civil Practice and Remedies Code § 63.004, the Texas wage garnishment exemption for consumer earnings

Talk to a Texas Bankruptcy Lawyer About Your Cash Advance

So if you're worried about a recent cash advance, the worst thing you can do is freeze. There are options, and the right one depends on facts a bankruptcy attorney can sort out in one conversation. Warren & Migliaccio, L.L.P. has been helping Texas families since 2006, and our team is Lead Counsel Verified. Call (888) 584-9614 for a free consultation. Our offices are in Richardson, Dallas, and Prosper, and we handle Chapter 7 cases throughout Dallas, Collin, Denton, and Tarrant counties. We can also explain how Chapter 13 works and refer you to a trusted Chapter 13 attorney if needed. We'll walk through your situation, run the six-point triage, and give you a clear sense of what to do next so you can start to rebuild.

Legal Authorities

1. 11 U.S.C. § 727 (governing Chapter 7 discharge of debts).
2. 11 U.S.C. § 523(a)(2)(C)(i)(II) (presumption of nondischargeability for cash advances aggregating more than the adjusted dollar amount within 70 days before the order for relief).
3. 11 U.S.C. § 707(b)(3) (bad-faith and totality-of-circumstances grounds for dismissal of a Chapter 7 case).
4. 11 U.S.C. § 523(a)(2)(A) (nondischargeability for debts obtained by actual fraud, false pretenses, or false representations).
5. 11 U.S.C. § 523(a)(2)(C)(i)(I) (presumption of nondischargeability for luxury goods or services aggregating more than the adjusted dollar amount within 90 days before the order for relief).
6. Federal Rule of Bankruptcy Procedure 7001(f) (categorizing dischargeability determinations as adversary proceedings).
7. Federal Rule of Bankruptcy Procedure 4007(c) (deadline for filing complaints to determine the dischargeability of a debt under § 523(c), generally 60 days after the first date set for the § 341 meeting of creditors).
8. Tex. Civ. Prac. & Rem. Code § 63.004 (exempting current wages for personal services from garnishment except in narrow categories).
9. 11 U.S.C. § 547 (preferential transfers, treated separately from § 523 nondischargeability).

This article is for informational purposes only and does not create an attorney-client relationship.