If you’re deeply in debt, you may be planning to file bankruptcy. If you’re like many people, you may simply be waiting for the holidays to pass so that you don’t have to deal with the paperwork and finances until afterward.
Well, be careful. The choices you make during the holiday season have the potential to derail a successful bankruptcy petition. Creditors are always looking for evidence of fraud when a debtor files bankruptcy. Even though you wouldn’t deliberately commit fraud, there are a lot of traps you can fall into or mistakes you can make when you’re shopping for holiday gifts.
Debts related to “luxury goods or services” up to 90 days before your bankruptcy are generally considered fraudulent. To avoid problems with your future bankruptcy, you need to understand that anything that isn’t considered an actual necessity falls into that “luxury” category. Gifts to your relatives or friends for the holiday definitely count as luxuries.
Don’t assume that you can get away with just taking a cash advance and using the money to buy gifts. Cash advances within 70 days of your bankruptcy petition are also generally considered fraud.
Another trap that people sometimes fall into is opening new credit cards during the holiday season in order to get a store discount. Stores that have their own credit cards, like Best Buy or Kohls, often encourage shoppers to apply for a card right in the checkout line. Usually, the discount offered is significant, so shoppers comply. Unfortunately, taking out a new credit card when you intend to file for bankruptcy is also considered fraud.
In essence, don’t do anything this holiday season that you don’t want to explain to the bankruptcy trustee later. If you’re struggling quite hard this holiday season due to your debt, it may be wisest to file bankruptcy now.
