The desire to turn over a new financial leaf usually blossoms when the bills from Christmas arrive in January.
What was a seed of an idea about getting out of debt, sprouts and grows after the holidays.
After the New Year, I see a surge of people who have explored bankruptcy with me months before. They show up in the New Year, actually reappear to file a bankruptcy case after the holidays.
And I end up saying, not now.
Why, when it was obvious to me from our initial meeting that bankruptcy was necessary and appropriate?
Because their holiday buying on credit may be tagged as fraudulent as to the card issuers.
Fraud not dischargeable in bankruptcy
It’s a principle of bankruptcy law that you cannot incur debt, knowing that you don’t intend to repay it. That’s fraud, or it looks like fraud.
Debts incurred by fraud can’t be discharged in bankruptcy.
The creditor has to file a timely complaint and prove its case, that’s true. Sometimes, the creditor doesn’t bother.
But, many of them do. Lose that trial and the debt survives the bankruptcy.
It doesn’t look good if you saw a bankruptcy lawyer in September, say, treated your family to a lovely Christmas in December by using your credit cards, then filed bankruptcy in February. Those facts make it look like you planned all along to shed the December spending in bankruptcy in the New Year.
In effect, the burden of proof in a bankruptcy trial shifts to you to prove that it wasn’t fraudulent. Not a good way to start your new financial life.
So my advice to someone with recent credit card use is usually, wait a couple of months. Make some payments on that holiday debt. Don’t invite a fight about your honesty in your holiday spending.
Start new now
Whether your financial fresh start next year involves bankruptcy or just serious belt tightening, make it easier on yourself.
Start planning now how you can scale back some of the excesses of the holidays. Don’t dig the hole deeper.
- Apply time and thought to holiday making, rather than money.
- Leave your credit cards at home.
- Give gifts of your time and or skill.
- Give one gift rather than several.
- Engage your children in making gifts rather than buying them.
- Entertain at home rather than at a restaurant. Cut out the hard liquor.
- Recycle or borrow decorations.
In short, focus on people rather than things. That’s where the joy in the holidays is found, anyway.
Image courtesy of Wikipedia and Xavier Romero-Frias