BE DEBT FREE

If you’ve made the decision to file for bankruptcy, you probably realize that the sooner you begin the process, the sooner you can be on the road to financial health. However, with the holidays not too far away, you may be concerned that filing now will mean no Christmas gifts for loved ones and friends.

What should you do? While only you can ultimately make that decision, it’s important to understand a couple of things.

Why you can’t go on a pre-bankruptcy spending spree

First, if you’re thinking that by postponing your bankruptcy until after the holidays, you can splurge on gifts, entertainment and more, you’ll be in for an unpleasant surprise. If you make large, unnecessary purchases within 90 days of filing, you could be accused of bankruptcy fraud.

In addition to having to pay for those purchases if you put them on your already-strained credit cards, you could face a hefty fine and possibly even jail time. Bankruptcy trustees look carefully at a person’s spending in the weeks and months leading up to their filing. They take an even harder look when people are filing Chapter 7 bankruptcy, where some debts are discharged, as opposed to Chapter 13, which involves a repayment plan.

You can buy Christmas gifts after bankruptcy – within reason

A good rule of thumb for anyone who has filed for bankruptcy is not to buy anything you don’t need. Typically, you can’t take on more debt unless it’s an emergency. Chapter 13 budgets do allow for expenses like clothing, food and other necessities. That just means you’ll need to stick to practical gifts for the next few years or dust off your crafting, baking or woodworking skills and make homemade gifts.

A lot of people will be cutting back on holiday spending and gift-giving as prices of many goods and services rise globally. You don’t owe anyone an explanation for why you’re doing it. The important thing is to have experienced legal guidance throughout your bankruptcy so that you can avoid costly mistakes that will only set you back.