When your debts are climbing and you already suspect (or know) that you need to file bankruptcy it can be very tempting to indulge in some substantial purchases on credit – while you still have some readily at hand.
This can be especially true during the holiday season when sales are everywhere, promotions are screaming about deep discounts and you just want to enjoy your holidays. However, you need to be careful, because the wrong purchases right now could prove seriously problematic for your upcoming bankruptcy.
The court may disallow discharges for luxury purchases
Generally speaking, once you know that you need to file bankruptcy, you should stop using your credit cards – although the court will usually make allowances for certain necessary items. For example, if you use your credit cards to buy groceries, work boots or gas for your car, the court is unlikely to see that as an abuse of the process.
Luxury spending and purchases are another story. If you incur any debts valued at $675 or more to a single creditor within 90 days of filing your bankruptcy or take cash advances totalling $950 or more within 70 days of your bankruptcy, the court will look closely at how that money was spent. If it was used on unnecessary items – like gifts, decorations, candy, liquor, party supplies or holiday travel – the court may refuse to allow you to discharge those debts. Doing so would amount to an abuse of the system, since it seems like you were simply taking advantage of the process to run up a few bills with no intention to pay.
When you’re in financial distress, bankruptcy can provide real, lasting relief. Learning more about how the process works today can help you avoid problems in the future.