Should You File for Bankruptcy after the Holidays?
For many Floridians, the stress of the holidays is matched only by the financial hangover they suffer when they open their credit card bills in January. At Nowack & Olson, we hear from many people who assume that the best time to file is right after the holidays.
Actually, it is more complicated than that. For some people, filing soon after the holidays would be a serious mistake. We encourage you to contact our firm to review your financial situation.
You Might Not Be Able to Wipe Out Your Christmas Gift Debt
The bankruptcy code prohibits the discharge of “luxury goods” when made too soon to the bankruptcy filing. In particular, Section §523(a)(2)(C) states that luxury goods exceeding $725 made to a single creditor within 90 days of filing are presumed non-dischargeable. (The maximum amount is regularly adjusted.)
Some of your purchases might fall into the “luxury” category, especially if you went overboard this holiday season. Of course, the bankruptcy code doesn’t define luxury, though it is the opposite of “necessities,” which are things like food, utilities, and necessary medicines.
If you bought your girlfriend a diamond ring, then it is probably a luxury. Depending on the cost, you might not be able to discharge the debt. Likewise, if you splurged on a vacation to the Caribbean for the holidays, you probably cannot wipe that out, either. Review recent purchases with an attorney, who can help you understand how a judge will characterize them.
Cash Advances Might Not Be Dischargeable
The bankruptcy code also presumes that cash advances made within 70 days of filing are non-dischargeable if they are for more than $1,000. Many people take out advances to pay for holiday gifts or to have extra cash.
Of course, cash advances (like luxury purchases above) are only non-dischargeable if the creditor challenges your attempt to wipe them out. Your creditor will need to file paperwork in court, and some won’t go to the hassle unless your cash advance was for tens of thousands of dollars. However, this is still a consideration to be aware of.
Your Holiday Bonus Could Disqualify You from a Chapter 7
To qualify for a “straight” Chapter 7 bankruptcy, you need to pass a means test which compares your income to a similar-sized household in Florida. If you are under the median for the state, then you automatically qualify. If not, then you need to qualify another way or pursue a cumbersome Chapter 13 bankruptcy.
For the means test, income includes more than your monthly paycheck; it can also include any bonus that you received. The holidays are a popular time for bosses to hand out end-of-year bonuses, and your bonus could put you over the limit.
How to Decide when to File
Please contact one of our Plantation bankruptcy attorneys today. There are many considerations, some of which we have touched on.
If you are thinking of filing, tell friends and family to hold off on giving gifts this year. You could lose property in a Chapter 7 bankruptcy, and there is no reason to accept an expensive gift only to turn it over to the bankruptcy trustee. Call us today at Nowack & Olson, PLLC to discuss your case.