If you’ve committed to getting out from under overwhelming debt next year, you’re likely considering the pros and cons of filing for bankruptcy. If that’s the choice you ultimately make, what does that mean for your holiday spending?
If you’re thinking of one last big spending spree, think again. If you file for bankruptcy early next year, the bankruptcy court will look back on your recent spending. If it’s significant – particularly if it just added to your debt – that could be considered bankruptcy fraud, which is illegal. In addition to facing fines and possible incarceration, you’ll also be denied the right to file for bankruptcy.
If you file for bankruptcy, you’ll need to complete a Statement of Financial Affairs that goes back even further than the past few months. For example, you’ll need to disclose any gifts you’ve given over the past two years valued at over $600 per individual. Not completing this document thoroughly and accurately can also be deemed fraud.
Changing your habits around holiday gifts and other spending
If you haven’t already started cutting back on holiday spending, this is the time to do it. That doesn’t mean you can’t give gifts. You just need to be selective – and creative. Start limiting your gift-giving to immediate family. Limit it to things they need anyway, like clothes, shoes and backpacks. Even after filing for bankruptcy, people are allowed to spend money on essential items.
For more extended family, friends and those in your social circles, suggest doing Secret Santas or making or baking – rather than buying – gifts. Don’t be afraid to say that you’re really on a tight budget and just can’t afford an expensive dinner out with friends or participate in a gift exchange where the maximum value is $50. A lot of people are in that same position, so people should understand and respect that.
As you consider how to tackle your debt and whether bankruptcy is the best solution, it’s smart to get legal guidance to address your questions and concerns. This can save you from unnecessary and costly missteps.