Chapter 13 Bankruptcy and the Holiday Season

The holiday season often is expensive and stressful even under the best financial circumstances. Many families spend thousands of dollars every holiday season on gifts for other family members, friends, and co-workers, not to mention vacations involving extensive travel and hotel costs. Yet, if the holiday season is a financial stressor even for people who are feeling relatively stable financially, it is often extremely difficult for families struggling with debt. For those who have already filed for bankruptcy, the holiday season can be particularly challenging. Is it possible to enjoy the holiday season if you recently filed for Chapter 13 bankruptcy or are planning to file for bankruptcy in the near future? An article in The Balance addresses this question, and we want to discuss it with you as we move into the holiday season.

Managing Holiday Spending After Filing for Chapter 13 Bankruptcy
If you recently filed for Chapter 13 bankruptcy and are in the early stages of your repayment plan (which likely is designed to last for anywhere from three to five years), it can be extremely difficult to know if you can put any of your disposable income toward the holidays this year. If this is your situation, you are likely making monthly payments as part of your repayment plan, and you are trying to determine if you can spend any of your money on Christmas gifts or festivities.

For most Chapter 13 debtors, your disposable income is typically the amount of your monthly payment in your repayment plan. As the article clarifies, disposable income is the amount of money you have left at the end of each month once you have paid your bills and other necessary expenses. During the holidays, most families rely on some of their disposable income to buy gifts and to plan trips. However, if you are making Chapter 13 payments, it is unlikely that you will have any disposable income to spend on Christmas or other holidays this season.

Can You Charge Holidays Costs on Your Credit Card During Chapter 13 Bankruptcy?
When you are making monthly payments as part of your Chapter 13 bankruptcy repayment plan, it is important to know that you are probably not permitted to take on any new debt as long as you are making payments under the terms of the plan. To be sure, for the period that your repayment plan lasts—like we said, anywhere from three to five years—you cannot take on new credit card debt or other types of debt.

There are some situations in which a debtor is permitted to take on new debt during the course of his or her Chapter 13 bankruptcy plan. However, in order to take on additional debt, you will typically need to have permission to do so from the court. The court will not allow you to take on new debt to pay for Christmas gifts. The kinds of situations in which a court might grant permission to take on new debt are those concerning financial necessities, like replacing a broken water tank in your house or doing necessary repairs to your home after a storm.

Debt Management During the Holidays Before You File for Bankruptcy
If you are currently considering bankruptcy but have not yet made the decision to file, it is important to manage debt during the holiday season. If you are struggling financially, you should avoid making credit card charges just for the sake of Christmas. According to the article, “a common suggestion is that you spend no more than 1.5 to 2% of your gross income on all things associated with the holidays.”

Contact a Bankruptcy Lawyer in Oak Park
If you have questions about additional debt while making Chapter 13 payments, an Oak Park bankruptcy lawyer can assist you. Contact the Emerson Law Firm today for more information.



See Related Blog Posts:

Can I Discharge HOA Dues in Bankruptcy?

How Will an Inheritance Affect My Bankruptcy Case?

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