The holiday season is filled with cheer, generosity, and — let’s face it — extra expenses. Between gifts, travel, decorations, and festivities, it’s easy for spending to spiral beyond your budget. But if you’re considering filing for bankruptcy (or already in the process), holiday spending can have serious financial and legal consequences.
Craft Law Offices would like to help you understand how these purchases can affect your case, which is key to protecting yourself and making smart financial decisions this holiday season.
1. Bankruptcy Courts Look Closely at Recent Purchases
When you file for bankruptcy, your financial activity leading up to the filing date doesn’t disappear — it’s carefully reviewed. The court and your bankruptcy trustee will examine your recent spending habits, including credit card charges, cash advances, and large purchases made in the 90 days before filing. If those purchases appear excessive or unnecessary, they could raise red flags and potentially be labeled as “fraudulent spending.”
2. Luxury Purchases Can Be Problematic
Under bankruptcy law, luxury spending before filing can be challenged. For example, the Bankruptcy Code presumes that certain debts are not dischargeable if they were incurred shortly before filing:
- Luxury goods or services over a certain dollar amount (around $800–$900, depending on the year) within 90 days before filing.
- Cash advances over roughly $1,100 within 70 days before filing.
What counts as “luxury”? Anything not reasonably necessary for your support or maintenance is considered a luxury, including expensive gifts, jewelry, travel, or high-end electronics. If you rack up these kinds of charges, your creditors may object, and you could end up still responsible for paying those debts even after bankruptcy.
3. Intent Matters
One key factor is intent. If you used credit knowing you planned to file for bankruptcy, the court may consider that an attempt to defraud your creditors. On the other hand, if you made reasonable, necessary purchases (like groceries or winter clothes for your family) without any intention of avoiding payment, those are typically not considered fraudulent. Still, perception matters — and even innocent spending can complicate your case.
4. Timing Is Everything
If you’ve already done some holiday shopping and are thinking about filing, timing your bankruptcy filing carefully can make a big difference. Waiting a few months may help demonstrate that your purchases were made in good faith and not in anticipation of bankruptcy.
A qualified bankruptcy attorney can review your situation and help you decide the best time to file.
5. How to Handle the Holidays if Bankruptcy Is on the Horizon
If you know bankruptcy might be in your future, here are some tips to keep your holiday finances under control:
- Avoid new credit card debt. Stick to cash or debit if possible.
- Create a realistic holiday budget — and stick to it.
- Focus on meaningful, low-cost celebrations instead of expensive gifts.
- Consult your bankruptcy attorney before making any large purchases or financial moves.
A little restraint now can save you from major headaches later.
Bankruptcy is designed to give you a fresh start — but how you manage your finances leading up to your filing matters. Holiday overspending or last-minute luxury purchases can delay your case, create extra scrutiny, or even leave you responsible for debts you hoped to discharge.
Before making big holiday purchases, take a step back and think about the bigger picture. If bankruptcy might be in your near future, talk to an attorney first. Call Leslie Craft with Craft Law Offices and let her help you navigate the process wisely. She can help you and protect your financial future long after the holiday lights come down. Call today, 252-752-0297.