Whether you already know that you’re going to file bankruptcy after the first of the year (and are just putting it off to avoid dealing with it during the holidays) or you just think you may need to file, it’s important to avoid some critical mistakes right now.
Racking up new debts this holiday season could leave you with a major problem – the kind that could see your bankruptcy fall apart and even lead to charges for bankruptcy fraud. Here’s what to keep in mind.
Luxury purchases are forbidden within a certain time
If people were allowed to spend whatever they wanted while knowing that they’re going to need to file for bankruptcy, the temptation to do so might be high. However, there are safeguards in place that protect creditors.
“Luxury” purchases (which are broadly defined as any goods or services you don’t really need to survive) that total more than $800 are forbidden within 90 days before the bankruptcy petition is filed. This includes both single large purchases and small ones that add up. Similarly, cash advances on your credit cards that total more than $1,100 are forbidden within 70 days before filing.
Luxuries include – in the court’s view – things like travel costs to go see your relatives for the holidays, gifts for the kids and other holiday-related expenses, no matter how critical you see them.
What doesn’t count? You can still use your credit cards to pay for necessities like new tires for the car to replace ones that are balding, clothes that you need for work (within reason), groceries and utility bills. Just keep your receipts and be prepared to justify the expense to the bankruptcy trustee if you’re asked.
If you’re approaching bankruptcy, it’s unwise to wait. Seeking informed legal guidance today can help you avoid bigger problems down the road.