Oftentimes, people who are struggling with debt have a heavy reliance on credit, which can make them anxious about making it through the holiday season without their credit cards or line of credit. As a result, many individuals opt to file for bankruptcy in the New Year so they can keep using their consumer cards for gifts and other extra costs associated with the holiday season.
Unfortunately, any expenses that are deemed “extravagant” are not dischargeable through bankruptcy. Your creditors could oppose your discharge from bankruptcy if they argue that your purchases were made with the intention of not paying back.
Here are some things to keep in mind if you decide to file for bankruptcy before the holidays:
- Consider tax implications
While some of your debt will be discharged, you will also lose your entitlement to an income tax refund for the year you file for bankruptcy, as well as any previous years not filed.
If you commonly receive an income tax refund every year, filing for bankruptcy before the holidays means that your trustee will seize the tax refund for the income tax return due by April of the following year. On the other hand, filing after the holidays means that your trustee will receive your tax refunds for the income tax refunds due that April, as well as the refunds due the following year.
- Redirect your monthly credit card payments to the holiday season
Rather than incurring additional debt that you will be required to pay even after filing bankruptcy, you can choose to file early and free yourself from the obligatory credit card payments. If you eliminate the credit cards in time, you won’t have to make the required monthly debt payments. So you can use that money to enjoy the holidays instead, and you won’t incur more debt.
- No-credit Christmas
There are many other ways to enjoy your holidays without relying on consumer credit or line of credit. For instance, you can organise pot-luck gatherings, make homemade gifts for everyone, and even budget the available cash with limits for gift purchases. This may even be a boon that leads to setting new family traditions.
Final note
When you make the decision to file for bankruptcy, you need to take your time and seek professional help to weigh the pros and cons. There are many good reasons to file before the New Year, like the avoidance of more debt, peace of mind when the collection calls stop, and an opportunity to start afresh in the New Year. It may also be better for you to wait until after the holidays. Speak with a Licensed Insolvency Trustee today to learn more.