The holiday season is fast approaching, so it is important to start making wise financial decisions if you are considering bankruptcy. Below are three areas that individuals can create problems just before filing bankruptcy. By avoiding these activities during the holidays, you can avoid trouble and make all your seasons bright!
First, avoid overspending. Financial problems can create mental and emotional stress which is only heightened during the holidays. For some this stress can become overwhelming and cause depression. Thoughts like, “Well, I’m going down anyway, so what does it matter?” can lead to an impulsive spending spree that makes matters worse in the long run. That spending spree may mean that you don’t have money to pay the electric bill or buy gas to get to work. Instead of overspending, give the gift of time with family and friends enjoying low-cost activities, or pamper yourself with a good book or rent a video to reduce stress.
Second, avoid using credit. Credit card spending immediately before bankruptcy is often not dischargeable, especially if the charges are for non-essential items. Likewise, cash advances from credit cards are often non-dischargeable. Use of any credit just before filing bankruptcy will be scrutinized by the creditor and possibly the bankruptcy trustee. Credit from credit card use, cash advances, payday loans, or any other source may land you in trouble, including criminal trouble, if you are insolvent when you take the loan and have no intention to repay the debt.
Finally, be careful about giving gifts to friends and family members. The holiday season is a time for giving, and normally being generous would be encouraged. Unfortunately, transfers of cash or property to friends or family can create problems in a subsequent bankruptcy case. Some common examples of high dollar property transfers that may cause a red flag include: transfer of title to a vehicle; gifts of jewelry, guns, or household items; and repaying personal loans to friends or family. Once the property is transferred, you can no longer protect it with bankruptcy exemptions, and the bankruptcy trustee may compel the turnover of the property for the benefit of your creditors.
Surviving the holiday season while preparing to file bankruptcy is stressful, but some find it strangely liberating. Once you decide to file, you may experience a sense of relief, knowing that your case is being handled by an experienced bankruptcy attorney and you are now on your way to solving your debt problems. The best advice is to seek the counsel of your attorney before making any transfer of property, using credit, or making any significant financial decision. This holiday season take the focus off of your debt, and put it on the people that you care about, including yourself!