Your debts have become overwhelming – but you’ve committed to a proactive approach to the problem. You’re filing for bankruptcy right after the start of the new year.
What does that mean, then, for your Christmas holiday? You need to be very cautious about how you approach gift giving (and spending, in general) this Yuletide season.
Luxury purchases and extravagant gifts can get you into trouble
Essentially, once you file for bankruptcy, you have to open up your financial records for the trustee assigned to your case. They will scrutinize not only the gifts that you’ve given others over the last two years but any recent purchases you’ve made on credit or cash advances that you’ve taken.
Debts incurred to a single creditor over $800 for anything the trustee may deem “luxury goods or services” within 90 days of your bankruptcy filing will be presumed to be nondischargeable. So, too, will any cash advances on your credit cards that total more than $1,100. That could put you in a serious bind, especially if the trustee decides that you acted intentionally.
Alternative options to consider
So, how do you handle holiday gifts when you’re watching your budget unusually closely? Here are some tips:
- Limit your gift list to just immediate family and stick with practical items, like clothing or food. Those kinds of essential purchases are still permitted (within reason).
- Make gifts for extended relatives or friends. You can bake cookies, make gingerbread or – if you have an artistic bent – make them watercolor bookmarks. They may be token gifts, but it really is the thought that counts.
- Give your time. A lot of people don’t really need more “stuff,” but they will appreciate your time, so call up your best friend and propose a movie night instead of a gift exchange.
While you’re considering your debt relief options, don’t forget that legal guidance can help you identify both options and pitfalls.
