This can be a difficult time of year to be considering or filing for Chapter 13 bankruptcy. While starting the new year off on the road to a financial future unencumbered by a mountain of debt is wise, getting through the holiday season can be a challenge.
Among the most-asked questions by people dealing with bankruptcy at the end of the year is whether they can spend any money on non-essentials (like Christmas presents) once they file. Along with that, they often want to know whether they can spend freely on gifts, entertaining, decorations and other holiday expenses prior to filing.
Watch your spending before filing
Let’s deal with that second question first. You should never engage in unnecessary spending just ahead of filing for bankruptcy. Bankruptcy courts typically consider it fraud if someone puts a lot of purchases on credit cards before they file knowing they can’t pay them off.
It’s also just a very unwise move financially. The sooner you start cutting back and living within your means, the easier it will be to adjust to bankruptcy.
Essential purchases can be gifts
As for the first question, your ability to spend money on non-essential items will be limited in Chapter 13. However, you can spend money on clothes, school supplies, food and other necessities (within reason). You can give these kinds of things as gifts.
When it comes to gifts for more distant family members, friends and co-workers, you’ll just need to be creative or regift things you’ve never used. If you’ve developed a habit of giving lots of gifts over the holidays or doing a considerable amount of entertaining, you’ll just need to cut back. Most people can (or at least should) understand if you tell them you’re just not in a financial position to do that. That’s all the explanation you owe anyone.
Understanding how Chapter 13 bankruptcy (or Chapter 7, if you qualify for that) works before you file can help you better deal with it successfully. Getting experienced legal guidance before you make any decisions is a good idea.