Consumer Bankruptcy and the Holidays: Things to Know

The holiday season can be a joyful time of the year, but it is also traditionally a time in which consumers amass a significant amount of debt. For consumers who are already struggling with debt, charging gifts on credit cards and spending extensive amounts of money on holiday parties, dinners, and décor can be overwhelming, especially when the holiday season comes to an end and the debt remains. If you were already considering consumer bankruptcy before you took on additional debt over the holidays, you might assume that it makes sense to get started on your bankruptcy case in the early days of the New Year. Yet filing for consumer bankruptcy so soon after you have incurred a substantial amount of debt can actually be a problem.

Our Oak Park bankruptcy lawyers can assist you with any questions you have about the consumer bankruptcy process or filing for bankruptcy during or after the holidays. In the meantime, the following are some things you should know about personal bankruptcy and the holiday season.

Debts Incurred After Your Bankruptcy Filing Likely Will Not be Liquidated in a Chapter 7 Case

Under U.S. bankruptcy law, debts that you incur after you have filed for bankruptcy are not typically part of your bankruptcy case. As such, they will not be dischargeable, but they also will not be subject to liquidation in a Chapter 7 case. Accordingly, you might plan to file for bankruptcy before you purchase Christmas gifts or other holiday season items for your family.

Debt Incurred During the Holidays Before You File for Bankruptcy May Not be Dischargeable

Generally speaking, credit card debt can be discharged in a bankruptcy case. However, you cannot assume that any credit card debt you incur during the holiday season will be dischargeable in your bankruptcy case, especially if you file for Chapter 7 bankruptcy soon after the holiday season ends. Indeed, under the U.S. Bankruptcy Code, any consumer debts of more than $500 that are accrued within 90 days prior to your bankruptcy filing may be considered non-dischargeable “luxury goods or services” and will not be dischargeable in a Chapter 7 bankruptcy case.

This is true regardless of whether you obtain tangible property by making a credit card charge, or you charge expensive dinners at restaurants or purchase gift cards for services. Similarly, cash advances of more than $750 taken out through a consumer credit plan will not be dischargeable if they are obtained by the debtor within 70 days of the bankruptcy filing.

It is important to distinguish between luxury goods and services, however, and goods or services that may be necessities that you are charging because you have no other way to pay for them (such as necessary food, utility bills, or medical services). Indeed, the U.S. Bankruptcy Code clarifies that “the term ‘luxury goods or services’ does not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor.”

Holidays Bonuses at Work Could Affect Your Eligibility for Chapter 7 Bankruptcy

If you are expecting to receive a holiday bonus from your employer, you should know that the bonus will count as income and could impact your eligibility for Chapter 7 bankruptcy since you will need to pass the “means test” in order to file.

Contact Our Oak Park Bankruptcy Attorneys

An Oak Park bankruptcy lawyer at our firm can answer any questions you have about the consumer bankruptcy process. Contact the Emerson Law Firm today.



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