Finance questions: Maxing out credit cards on purpose can be fraud

You asked

I have heard of people charging all their gas to their credit cards, planning to max out their cards and then file for bankruptcy. Their thought is that the oil companies have plenty of money, so they can pay for it. But I thought the credit card companies paid the gas station so the customer owes the credit card company. What are the consequences of bankruptcy anyway?

Filing for bankruptcy is not an easy way to avoid paying for gas. The credit card issuer would be the loser in the game you describe. However, maxing out cards without intent to pay the bill is considered fraud. Someone who did that and then filed for bankruptcy might not be allowed to use bankruptcy to wipe out the debt.

The main consequence of bankruptcy is that it stays on your credit record for 10 years, during which you may have trouble borrowing money, and if you are able to get a loan, you will be charged high interest rates.

I noticed an ad for investing in real estate first mortgages. It said you could earn 15 percent interest. I'd certainly like to earn that kind of return. What do I need to consider?

The 15 percent promise is a big red flag telling you that this is a high-risk investment. That means the No. 1 thing to consider is whether you are financially in a position to take big risks. Borrowers who are willing to pay 15 percent on a mortgage are those who cannot get a loan at a conventional rate.

What if the borrower defaults and property turns out to be worth less than the mortgage? You could end up the owner of a property that you don't want and can't sell, that's worth less than what you are owed.

Reader comments

Until we read your article last Sunday, we did not realize we had done a staycation this summer!

Last summer we spent five weeks in Europe on a long-awaited trip to meet my relatives in Ireland for the first time, my husband's family in Holland after many years, and sites in Italy where my husband had studied. We kept a journal of our trip with all sorts of details of people, places, food, impressions.

Not being able to go back this summer, we took out our journal and did a virtual trip! Each day we reminisced what we had done that same day last year. We cooked the type of meals we had enjoyed. The euro and pound had no effect on our staycation.

We thought last year's vacation was perfect. Who would think we could have perfect all over again — the second time around!

Pat and Jim Rossewey, Clearwater

In Michigan, you could deposit your will with your county. This relieved you of the need to keep track of the original. Our Florida attorney said that doesn't work in Florida. There should be a method for depositing your will with a public agency.

Paul C. Blatt, Dunedin