Can Debt Incurred During the Holidays Get Discharged in Bankruptcy?
The holiday season often involves non-essential spending that many Americans do not appropriately budget for, especially when they are already struggling with debt. According to data from WalletHub, South Florida is a region where holiday spending tends to be especially high — among the top 20 highest spending regions in the country. On average, in South Florida, consumers expect to spend more than $3,000 on gifts, parties, and travel. And often, they surpass their expected budgets. If you are already struggling with credit card debt and “buy now, pay later” debt, the holiday season could make things worse. If you do end up taking on more debt over the holidays, you may be wondering if any of that debt can be discharged if you file for bankruptcy in the new year.
The primary determination of whether a type of debt that is generally dischargeable — such as credit card debt or “buy now, pay later” debt — can be discharged in a particular bankruptcy case concerns the timing of the debt and whether it was necessary to incur. Our West Palm Beach bankruptcy attorney can explain in greater detail.
Luxury Debts and Cash Advances Are Not Dischargeable in a Certain Time Frame
If you make charges related to holiday gifts, travel, and entertaining in November or December, it is essential to understand that filing for bankruptcy in January or February of the New Year will likely result in a bankruptcy court determining that your “holiday” debts are not eligible for discharge because of the timing and their classification as luxury debts.
What is a luxury debt? In short, if you make a purchase from a single creditor of more than $900 on credit within 90 days from the date of filing for bankruptcy, this debt will likely be considered a luxury debt (for luxury goods or services) and will not be eligible for discharge. Creditors can argue “presumptive fraud” for these purchases, suggesting that you made the charges with plans to file for bankruptcy and to avoid ever making payment.
Likewise, if you take out a cash advance on credit of more than $1,250 within 70 days from the date of filing for bankruptcy, the same issue described above will arise and the debt may not be dischargeable. As such, before you make any major charges, you should seek legal advice if you have plans to file for bankruptcy.
Contact Our West Palm Beach Bankruptcy Lawyers for Assistance
Anyone who is considering a personal bankruptcy filing should make sure that they have a clear understanding of how any recent debt will be treated in a personal bankruptcy filing. Whether you are thinking about filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy, certain recent debts incurred very near to the date of your bankruptcy filing may not be eligible for discharge, as we discussed above. It is important to discuss the specific details of your case with one of the experienced West Palm Beach bankruptcy attorneys at Kelley, Fulton, Kaplan & Eller as soon as you can. We can answer any questions you have about the classification or dischargeability of particular debts, and we can begin working with you on your bankruptcy case as soon as you are ready to file. Contact our firm today to learn more about how we can assist you.
Sources:
law.cornell.edu/uscode/text/11/523
wallethub.com/edu/holiday-budgets-by-city/16912
