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Holiday Spending and Bankruptcy: Don’t Make a Mistake ‘Yule’ Regret

Dec 16, 2015 03:39PM ● By Ellen Wright

 Bankruptcy is never a pleasant thing to think about, and it is likely the absolute last thing you would want to think about during the holidays. In today’s frantic world, it’s so easy for time and money to be overextended and it becomes even more overwhelming for many people during the holiday season. It’s important for all of us to be responsible while using credit cards, and to use “sound financial planning” in all holiday shopping to avoid future problems. If you’re feeling the holiday pressure to “out spend” what you make or currently have credit card debt that is snowballing as the holiday season rolls along, read on.

A New Year, A Fresh Start?

It can be enticing to just give in to the pressure to do whatever it takes to get the gift-buying out of the way this time of year. Many, if not most people feel obligated to give into giving/receiving expectations and don’t want to think about the consequences. “I’ll just get Uncle Tom taken care of, then I’ll worry about the credit card bill later on in the new year…” If you find yourself adopting this thinking pattern, first, ask yourself whether or not you will even have a job next year to pay the credit card will with. Then, consider that even if you do, is it going to be worth 9 months of bills, only to succumb to the pressure again next year?

Many cash-strapped consumers erroneously believe that a chapter 7 bankruptcy filing will get rid of any charges they put on their credit cards while doing their holiday shopping. This misplaced “new years” mind set causes many people to think they will have their fresh start and be “off with the old and in with the new”, not realizing how long a bankruptcy procedure can take.

Credit Cards – Avoid Charging Gifts

If you already know, or reasonably believe that you will have to file a bankruptcy petition in the coming months, beware that your pre-bankruptcy holiday credit card spending may be risky business. Racking up debt within 90 days of the filing of a bankruptcy petition is preemptively fraudulent, and many would-be bankruptcy clients are shocked when that word surfaces during their initial consultation. “What do you mean, fraud? Me? Never!” are a few of the things people frequently say when this issue surfaces. Most people do not intend to engage in fraud, but for some, the temptation to use a credit card during the holiday shopping rush is overwhelming. These are important issues to keep in mind if you are thinking about filing a bankruptcy petition within the near future.

Cash Advances – You Better Watch Out

Like the charges on your credit card, if there are cash advances taken on a credit card within the 90 days prior to your bankruptcy filing that totals more than $600 you may be distraught to learn that it may not be dischargable. A bankruptcy trustee will not be pleased to see large sums of cash drawn against unsecured lines of credit timed right around the holiday season. Be mindful that it is considered fraudulent if the debt is incurred with the intention not to repay it and the credit card company can come in and object to those specific cash advances being discharged in your bankruptcy.

The Bottom Line

Use good judgment and do your best to to make this holiday season “cash-only”. You will never regret not digging the debt hole deeper only to find it even more difficult to later escape through a self-propelling cycle of credit card use. You may cringe at the thought of being dubbed a “Grinch” by your kids, but you will only be doing your them a favor in later life. Instead of giving into their material desires, they will see you exercising self-control and frugality, which are both good character traits to model.

If the damage has already been done, there is still hope and it is never to late for a fresh start.  If you are a Massachusetts resident, consult a qualified bankruptcy attorney to discuss your options and see what relief you may qualify for.

Merry Christmas!

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