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Thinking of Filing for Bankruptcy After Piling Up Christmas Debt?

Most people do not amass debt with the intention of never paying it off.  In general, people are forced to file for bankruptcy because of changing circumstances outside of their control.  However, when some people are already considering bankruptcy, they entertain the idea of racking up debt and getting it discharged through bankruptcy.  If that was your plan, think again!

Christmas pressure leads to bad ideas

It is not uncommon to feel pressure during the holidays.  You want to make your spouse, kids, parents, and pets happy.  If you are already considering bankruptcy before Christmas, racking up more debt to buy presents you cannot afford is a bad idea.

You may not know this, but according to bankruptcy law, the debts you incur 3 months before or after Christmas may not be dischargeable through bankruptcy.  You will be expected to “reaffirm” the debt (pay it down with monthly payments) or pay it all back at once during bankruptcy.

Extra money received during the holidays makes a difference

Many people receive bonuses at work toward the end of the year.  If you are considering bankruptcy and usually receive a Christmas bonus, you should consider filing at least 6 months before bonus time.  This is because you are subject to what is called the “Means Test” when your bankruptcy filing is being considered.  If your income-to-debt ratio is considered favorable, your bankruptcy filing may be rejected.

If you must buy things during the holidays

If you must buy gifts before or after Christmas, you should be very careful.  You should not create more debt in the process.  In other words, do not use credit cards to buy things.  Bankruptcy courts can view this as reckless or even fraudulent and refuse to discharge the debt leaving you liable.  Also, do not buy gift over $600.  Some people try to make large purchases to hide money, but courts know this, and it could be considered fraudulent.

What about gifts you receive?

If you are considering a bankruptcy filing after Christmas, you should discourage people from giving you large gifts.  For example, if your loved one buys you a car for Christmas, that car could be seized during bankruptcy.  Large cash gifts are also problematic.

You are allowed to receive normal “everyday” gifts and they generally are safe from trustee liquidation.  Additionally, you may be able to keep large gifts if you can pay enough toward outstanding debt.

So, avoid buying or receiving large gifts during the holidays if you plan to file for bankruptcy after Christmas.  It may not go as you planned.

Millions of people encounter financial difficulty and sometimes by no fault of their own.  You do not have to live under crushing financial strain forever.  The attorneys at Dsouza and Strachan Law Group have the skill and expertise to help you navigate your debt and get you back on the path to financial freedom.  Contact Dsouza and Strachan today for a free consultation.

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