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Chapter 7 bankruptcy and Christmas: what’s the solution?

For many of us, the holidays are when budgets go out the window. In 2016, the average American shopper spent $935.58 on Christmas presents, and this year the total will probably go up, thanks to higher-priced gifts and advertisements that make it difficult to resist overspending.

For some people, the intention is to spend as much as possible this holiday season and then schedule a visit with a Chapter 7 bankruptcy attorney. There are, however, many reasons why this is a really bad idea.

A friendly warning

When you know that you intend to file for Chapter 7, the golden rule is not to incur debt that you have no intention of repaying. You might be tempted to max out your credit cards and personal lines of credit and then discharge the debt in bankruptcy, but your creditors will certainly review your pre-filing purchases and regard such spending as fraud. You could face an objection to your bankruptcy discharge and even be charged with a criminal offense.

The same warning applies if you’re thinking about making large gifts to loved ones. For example, you may sign over ownership of a summer cottage to your newly married son as a surprise Christmas gift, but the bankruptcy laws frown on this type of pre-filing transfer, and the recipient of such a present might be compelled to turn it over to your trustee.

A note about holiday income

Caution is called for if you intend to work overtime or take a second job to afford holiday presents. While such a move is not illegal, the additional income can pose a problem when your disposable income is being calculated to see if you qualify for Chapter 7. This holiday cash can inflate your six-month average income and force you to file for Chapter 13 instead.

The same possibility applies if someone decides to give you a large cash gift. Perhaps your parents have noticed that you’re going through a rough patch financially and decided to give you $3,000. The problem is that this money is counted in your median income calculations if you receive it during the six-month period prior to filing for bankruptcy. A goodwill gesture from your mom and dad could push you into a five-year Chapter 13 instead of the Chapter 7 you intended.

Much as you want to give your family a terrific holiday, being financially irresponsible this season can only backfire on you if your intent is to file for bankruptcy in the New Year. If you have questions or concerns about your particular situation, then contact a New York Chapter 7 bankruptcy attorney who can give you the advice you need to keep a difficult situation from becoming worse once the holidays are over. Jayson Lutzky is a Bronx, New York attorney with an office located one block from the 4-train’s 183rd Street station. If you are considering bankruptcy, then set up a free initial in-person consultation by calling 718-329-9500. Saturday appointments are available. Visit www.MyNewYorkCityLawyer.com to learn more.

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