The Holiday season is customarily full of joy and giving but can also be particularly stressful for those who are overwhelmed with debt. If you are considering filing for bankruptcy to alleviate the pressure of your current financial situation, you may be wondering if you should file before or after the Holidays. Weighing your options can be complex, but there are a few factors to consider that will help you weigh the important decision to file bankruptcy or hold off.
Timing Does Matter
When filing for bankruptcy, timing is everything. The Bankruptcy Code declares that any debt incurred within a 90-day period before filing for bankruptcy may survive as nondischargeable debt. In other words, any debt you accumulate holiday shopping will be considered when you are filing for bankruptcy and will not be forgiven unless it is deemed a necessity. A necessity is defined by The Bankruptcy Code as any debt that is acquired for the maintenance or support of the debtor. Everything else is considered a “luxury good or service” and may be non-dischargeable. No matter the season, the ideal time to file for bankruptcy will always be a full 90 days after your last charge is made; however, there are exceptions to the rule so be certain to speak to an experienced bankruptcy attorney.
Holiday Bonuses Could Prevent You From Filing
When filing for bankruptcy, the Court will review your income for 6 months prior to the date you file. How much or how little you earn will play an important role in determining if you file for a Chapter 7 or Chapter 13 bankruptcy. If you stand to receive a large holiday bonus from your employer, it is important to consider which chapter of bankruptcy you are required to file based on your income as well as the timing of the bonus. Depending on if you receive the bonus before or after you file a petition, the extra income could potentially inflate your income over Chapter 7 limits and into a Chapter 13 reorganization.
Cash Gifts Can Be Equally Troubling
If you expect cash gifts over the holiday season, it may be best to file before you receive the money from friends or family. Any gifts received during the holiday season, including monetary gifts, must be disclosed in a bankruptcy. If you stand to inherit something important during the holidays from a loved one, such as a family heirloom, the same rule applies. Filing prior to receiving any gifts will protect your personal items and potentially keep your income under the threshold for a Chapter 7 bankruptcy.
Holiday Spending Could Be Considered Fraudulent
In some cases, people who plan to file for bankruptcy will intentionally accumulate more debt during the holiday season in hopes it will be forgiven when they ultimately decide to file. Those charges will be easily recognized by the Bankruptcy Court as fraudulent and may lead you down a long road of legal trouble. If the Court recognizes that you incurred a debt with no intention to pay it back, they consider it a misrepresentation and the odds of that debt being discharged become incredibly slim. Credit card companies have the ability to challenge your debt being discharged in court if they believe you entered into an agreement with their company without intending to pay for what you purchased. If you are considering filing for bankruptcy, avoid using credit during the holiday to minimize the risk of presumption of fraud.
Speak With An Experienced Bankruptcy Attorney
Whether you decide to file for bankruptcy before or after the holidays, it is important to speak with an experienced bankruptcy lawyer sooner than later. We will help you determine which choice is best for you, the timing of filing your bankruptcy and how to proceed. Schedule a free bankruptcy consultation with A Bankruptcy Law Firm, LLC today to learn more about your options moving forward.
Important Disclaimer: The information discussed above and throughout this website should not be relied upon to make any decisions without first speaking to a bankruptcy attorney. There are many intricate rules of law governing bankruptcy with many exceptions to the general rules that could change the advice given by an attorney based on the differing facts in each person’s special set of circumstances. THEREFORE, it is important to discuss any information contained in this website with one of our attorneys before taking any action or refraining from taking any action.