Bankruptcy can be the key to getting your finances back on track if you use it correctly. It’s not necessarily going to wipe away all of your debt, and it’s not a free pass to run up a large amount of debt and get away without paying it. However, it can help if used at the right time. Is right before the holidays the best time to file bankruptcy? It all depends on your current situation. However, there are some things you need to know about bankruptcy and the holidays.
A Holiday Bonus Could Impact Your Means Test
If you’re considering filing for Chapter 7 bankruptcy, you will have to pass the means test. This test looks at what income you have received in the past six months and uses that to determine if you qualify to have your debts discharged. However, this income is not limited to your regular paycheck. It also includes any money you may from other sources, including holiday bonuses. If you get a large bonus, it could make you ineligible for Chapter 7. Since the court only looks at the income you received before the date you filed, you may want to file before the holidays so that bonus doesn’t impact your eligibility.
If you receive cash gifts for the holidays, those are also considered income for the means test. File before these gifts are given to you so you do not have to claim them.
Gifts Are Not Necessities
Bankruptcy law states that any credit card purchases made within 90 days of your bankruptcy that are more than $675 and are for luxury goods are non-dischargeable. This means if you spend a lot of money on gifts for Christmas and then file for bankruptcy, those debts are likely to remain your responsibility. In fact, if you made a large number of excessive luxury purchases, the court may deny your case or investigate you for bankruptcy fraud.
While you do need to be careful about what you’re charging on credit and what holiday cash gifts or bonuses you get, bankruptcy may still be the right move to make before the holidays. It gives you the chance to start off the new year with the hope that your financial woes will soon be behind you.