Proceed with caution: Navigating the holidays before bankruptcy

On Behalf of | Nov 9, 2023 | Bankruptcy

Money’s beyond “tight,” and you have every reason to believe that you’re going to have to file a bankruptcy petition early in the coming year. In fact, the only reason you haven’t done it already is that you don’t want to deal with the paperwork and stress in the middle of the holiday season.

So, why not have one final “holiday blast” this year? Since you figure the bankruptcy will wipe out most or all of your unsecured debts anyhow, why not pull out the credit cards that still have some room on them (or open a new one) and go a little wild with your holiday shopping?

Using credit cards with no intent to pay is bankruptcy fraud

Using your credit cards and running up debts when you know you have no intention of paying the bill is fraud. Generally speaking, the court takes a pretty lenient view when the purchases were for essentials, like groceries, medication and gas for your car. For things like that, the court usually puts the burden on the creditor to prove that you never intended to pay. However, “luxury goods and services” are a different story. If you run up more than $675 in debt to a single creditor within 90 days of your bankruptcy or take cash advances of more than $950 within 70 days of your order for relief, the debts will be presumed to be non-dischargeable.

What exactly falls under the category of luxury goods and services? The term is intentionally broad, but it means anything that isn’t reasonably necessary for you or your dependents to survive. That means a basic laptop to replace your teen’s broken computer so they can do their schoolwork might not be a luxury good – but a high-end gaming laptop would be. Plane tickets to see your family back home for Thanksgiving could also be a problem, as are expensive holiday gifts for your significant other.

The winter holidays are full of joy, gratitude and sharing – but don’t let your generosity of spirit leave you in a bad place where a potential bankruptcy is concerned. If you’re contemplating bankruptcy after the start of the new year, your interests are best served by a cautious approach to gift-giving. Be mindful of your financial situation when you’re thinking about gifts. Seeking legal guidance can help you gain more insights that may help.