One of the rules about filing for bankruptcy is that you can’t purposefully try to cheat a creditor out of their goods or services and then turn around and discharge those debts via bankruptcy. Most of the time, that’s not a problem. The majority of people are deeply in debt by the time they file for bankruptcy, and they don’t have a lot of credit to spare.
However, what if you’re putting things off until after the holiday season is over? Well, you can run into problems with this rule if you use your credit to pay for things like gifts for your family or you take a cash advance to splurge on some of those holiday sales.
It’s easy to fall in to that kind of temptation. The fact that your financial state has been rough may have left you feeling somewhat deprived, which makes it very hard to resist those holiday sales. The fact that you know you soon won’t have access to any real credit can be additionally tempting. Further, our society puts a huge premium on gift-giving and other expensive aspects of the holiday season, and you may be concerned about letting down your family or friends.
After you file for bankruptcy, your creditors will look at your spending habits over the previous few months. If you charged any purchases to a single creditor that totaled $675 or more in the prior 90 days or took cash advances that total more than $950 in the previous 70 days before filing, the creditor may challenge the discharge of those debts.
If your charges or cash advances were used for basic necessities, they can still be discharged. Anything that might be deemed a “luxury purchase,” however, cannot.
You really don’t want to be in a position where you have to explain every purchase you made and justify its necessity to your bankruptcy trustee, so it’s smart to keep these limitations in mind. If you think that bankruptcy is in your future, learn as much as you can about the process now.