December 15, 2016
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No one can dispute that the holiday season is the best time of the year. It is that time of the year that everyone seems to have a smile on their face, vacation is on everyone’s mind, and families find the time to finally be together. Aside from these byproducts of the holiday season, shopping is also on everyone’s mind. People are either shopping for items for themselves or gifts for loved ones. There isn’t many people that are able to “escape” the holiday season without some form of shopping. But, unfortunately, shopping can be dangerous. We are often told that we should “live within our means,” but its harder said than done, especially during the holidays.
People who are not financially stable often feel compelled to purchase gifts for their loved ones for many reasons. First, it is common courtesy to buy a gift for someone that gets them a gift. Additionally, for those who have kids, not buying a gift for Christmas or Chanukah can cause a child to be very upset (to say the least). For these reasons, the holiday season places people in a position where they are almost forced to spend more than they can afford to. If one does not have money saved to buy a gift, he/she normally uses a credit card. Credit cards are probably the most-used tangible item during the holiday season. Unfortunately, racking up a large credit card bill can often force one to file a bankruptcy.
Bankruptcy Filings During the Holiday Season
It is not a secret that December is a “quiet” month for bankruptcy attorneys. Why? Because people are busy getting their homes ready for the holidays. Also, who really feels like speaking to a bankruptcy attorney during the holidays? January is normally also a quiet month because people have yet to receive their credit card bills containing charges for holiday shopping. Nonetheless, the months following (February and March) are some of the busier months of the year for us bankruptcy attorneys.
It is a common misconception that people who are struggling financially and are planning to file a bankruptcy can simply put all of their christmas shopping on their credit cards, and then have their credit card debts “wiped out” by filing a chapter 7 or a chapter 13 bankruptcy and getting a discharge (for further explanation of what is a discharge, click here). Credit card companies are aware of such behaviors, and often exercise their rights under the Bankruptcy Code to prevent bankrupt debtors from being able to erase debts by way of a discharge under a chapter 7 or a chapter 13 bankruptcy.
Can Credit Card Bills Be Wiped Out Through Bankruptcy?
Section 523(a)(2) of the Bankruptcy Code provides that debts (including credit card debts) of more than $550 for “luxury goods and services,” incurred within 90 days before filing of the bankruptcy, are presumed to be non-dischargeable (and cannot be “wiped out”). While goods or services that are reasonably necessary for support or maintenance (such as buying food) are not considered “luxury goods,” holidays gifts are usually considered just that, as those are not necessary for support or maintenance. Thus, credit card companies can argue in the bankruptcy Court that credit card debt incurred for gifts purchased during the holidays, or vacations taken during the holidays, cannot be discharged, or “wiped out”, in bankruptcy. For a credit card company to have the Court determine that a debt cannot be discharged, it has to file a non-dischargeability action. The bad news is that fighting such actions by credit card companies can be expensive for bankruptcy debtors due to the attorneys’ fees that will be charged in defending those actions. Attorneys’ fees will have to be paid whether or not the bankrupt debtor is the ultimate winner in the action (and succeeds in discharging the debt). As such, the practice or building up credit card debt with bankruptcy in mind can be dangerous.
We recommend that our clients live within their means, and spend frugally if they know that that times are tough. For those who are financially hurting and need to to consult with an attorney regarding the possibility of filing a chapter 7 or a chapter 13 bankruptcy, get the guidance you need from a bankruptcy law firm like KatzLaw! Contact us now and speak to our attorney.
Call (844) KATZ-LAW for your free, no obligation consultation!