Holiday Debt and Consumer Bankruptcy

The holiday season can be one of the most expensive times of year for many consumers, from throwing costly holiday parties to spending money on gifts for friends and extended family members. If you are already struggling with debt and considering consumer bankruptcy, it is extremely important to avoid taking on additional holiday debt this year. We want to discuss some tips from an article in Forbes for avoiding holiday debt, and then discuss the ways in which a consumer could face allegations of bankruptcy fraud if she were to charge significant amounts of money during the holiday season only to file for bankruptcy soon into the new year.
How can You Avoid Holiday Debt This Year?
Avoiding holiday debt is never easy. As the article highlights, “57% of American adults with children say they’re willing to take on debt to make their children happy,” and middle-income families are particularly susceptible to taking on unnecessary debt during the holiday season. To be sure, “consumers who take on debt over the holidays end up paying extra for it in the new year if they can’t pay it off by the deadline,” and high-interest credit cards in particular can result in an unmanageable debt in a short time.

What can you do to avoid holiday debt? The following are some tips:
  • Make an overall holiday budget that takes into account everything that you will need to spend extra money on this season, from travel and lodging to restaurants and parties. If you can not afford everything in your budget without taking on unmanageable debt, you should begin to think about ways of savings.
  • Set a gift budget for yourself and stick to it. This means setting a dollar amount for gifts for each recipient after you have calculated the total amount that you are able to spend without going into additional debt.
  • Consider sentimental gifts instead of expensive ones. Sometimes the best gifts do not cost any money.
  • Compare prices for gifts, travel packages, lodging, and other items before you make a purchase. You can often find better dealings by searching online, and sometimes hotels and retail establishments will match prices if you can find a lower price.
  • If you must use your credit card to make holiday purchases, you should use a credit card that has cash-back rewards, travel insurance, and no foreign transaction fees. This type of credit card can save you a significant amount of money in the long run.
  • Consider a seasonal job to help pay for holiday expenses.
  • Sell items in your home that you are no longer using or that you no longer want—someone else may want to buy them for the holidays.
Avoiding Bankruptcy Fraud and Non-Dischargeable Debt
When you are already in debt and are considering charging more items to your credit cards during the holiday season, it is extremely important to understand how bankruptcy fraud allegations could arise if you file for personal bankruptcy shortly after the holidays. According to Section 157 of the U.S. Bankruptcy Code, if you make charges to your credit card with the intent of seeking a discharge shortly thereafter, you could face fraud allegations.
Even if the question of fraud does not arise, it is extremely important to understand that charges you make shortly before the date on which you file for bankruptcy may be non-dischargeable. More specifically, under Section 523, consumer debts that a person owes to a single creditor that total more than $500 and are charges for luxury goods or services are non-dischargeable if they are made within 90 days of the date of the bankruptcy filing. Similar, certain cash advances totaling more than $750 made within 70 days of the date of filing for bankruptcy are non-dischargeable.
Contact an Oak Park Bankruptcy Attorney
If you have questions about managing debt or filing for personal bankruptcy, an Oak Park consumer bankruptcy attorney can speak with you today. Contact the Emerson Law Firm for more information.
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