There are a few holiday precautions to take when preparing for a bankruptcy filing according to our Athens Bankruptcy lawyer, including the following four:
DON’T TAKE ON DEBT YOU DON’T PLAN TO REPAY
The first and most important is to not incur a debt that you have no intention to repay. There is a great temptation to max-out personal credit cards and then discharge the debt during bankruptcy – especially when the credit is used to purchase gifts for other people.
However, credit card companies review your pre-bankruptcy purchases to discover bankruptcy fraud. You could face an objection to your bankruptcy discharge or even a criminal complaint! Before using available credit while considering bankruptcy, seek the advice of an experienced bankruptcy attorney.
DON’T MAKE LARGER GIFTS BEFORE FILING
Further, another way you can create a bankruptcy filing issue is by making large gifts to friends and family. For instance, you may sign over a car title as a gift to your child as a holiday gift. Unfortunately, the bankruptcy code could penalize this type of pre-bankruptcy transfer, and your child may lose the car to the bankruptcy trustee.
While the circumstances are different in every case, often you can give your son the car after the case is filed without penalty. Again, our Athens GA bankruptcy lawyer suggests that the safest route is to discuss any gifts with your bankruptcy attorney before making the transfer.
BE CAUTIOUS ABOUT EARNING EXTRA INCOME DURING THE HOLIDAYS
Finally, some individuals will work overtime or take on a part-time job to afford holiday gifts. This extra income can be problematic when calculating a person’s disposable income for bankruptcy purposes.
The Bankruptcy laws look to the past six months of income and project the debtor’s future ability to repay debts. Raising your six-month average income through overtime or a part-time job can push you out of Chapter 7 and into Chapter 13, or may increase your monthly Chapter 13 plan payments. Before taking on extra income, speak with your Athens GA Bankruptcy attorney.
TRY AND AVOID THE “LUXURY GOODS AND SERVICES” TRAP
The Bankruptcy Code provides that credit card purchases for “luxury goods or services” totaling more than $675.00 within 90 days prior to filing a bankruptcy case are presumed non-dischargeable debts and will survive the bankruptcy discharge.
However, the Bankruptcy Code goes on to state that “luxury goods or services do not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor.” That means if a debtor purchases twenty dollars in food from the grocery store, that charge is not be counted toward the aggregate of “luxury goods or services.”
So, by the plain language of the Bankruptcy Code, if a debtor charges over $675 on one credit card for food, gas, and other necessary items, there is no presumption of non-dischargeability.
Bear in mind that a presumption is just that: a presumption. In the first place, to get the presumption, the creditor must go to court and prove credit card charges totaling over $675 in the 90 days before the bankruptcy filing. Often, the costs involved in contesting the debtor’s discharge may exceed the benefits of having the debt excepted from discharge.
And the presumption can be rebutted—it is not conclusive. But, although there are many good defenses to a creditor’s presumption against discharge, the best advice is generally to wait to file bankruptcy until a full ninety days after your last charge.
WANT TO LEARN MORE ABOUT CHRISTMAS AND BANKRUPTCY LAW IN ATHENS GA?
The holidays should be a time of joy and celebration. They should not be used as an excuse to act financially irresponsible. Too often, we see people overextending their resources in the hopes of making another person’s holiday brighter. While the intention behind that kind of behavior is commendable, it can lead to bankruptcy filing issues if you are not careful.
If you are hurting and need to file bankruptcy, get the guidance you need from an experienced bankruptcy attorney and ensure that you don’t make matters worse while trying to do something nice for your loved ones this holiday season. Contact our Athens GA Bankruptcy Lawyers today at 706-546-0999