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Can Holiday Debt Be Included in Chapter 7 Bankruptcy?


Now that we’re in the middle of the holiday season, we thought it would be timely to discuss holiday debt and whether it can be included in Chapter 7 bankruptcy. If you’re like a lot of debtors, you may be wondering if you can use your credit cards in December on Christmas presents and include those charges in your Chapter 7 bankruptcy filing in January. After all, this is something that crosses people’s minds all the time, especially when they’re contemplating a January or February bankruptcy filing.

Christmas can be a very stressful time of year, and this is definitely the case for parents. There can be a lot of pressure from TV commercials, Amazon ads, friends, and family to exchange gifts. And when you have kids, Christmas is a BIG deal.

You may not have the money for a nice Christmas this year, but you may feel pressured into putting your holiday charges on credit cards so you don’t have to suffer the embarrassment of saying you can’t afford to buy presents. If you’re thinking of filing bankruptcy after the New Year, can you charge your Christmas gifts now and get them discharged in bankruptcy later? Not so fast.

Beware of Bankruptcy Fraud

Here’s the deal: Lots of people have thought of this first. So much that bankruptcy trustees and creditors are keenly aware of how debtors will abuse credit cards before filing bankruptcy. Some people will go so far as to get as many credit cards as they can, max them out, then file for Chapter 7 bankruptcy.

Debtors can do this during the holidays, or any time of year. Or, they’ll go out and max out their existing credit cards so they can buy Christmas gifts, but have zero intention of paying the credit card companies back.

While bankruptcy fraud typically involves hiding assets or transferring them to other people, it also involves the act of maxing out credit cards with the intention of including the debt in Chapter 7 bankruptcy.

Essentially, bankruptcy trustees and credit card companies actively look for this behavior. If a debtor racks up purchases for luxury goods or services within 90 days of filing bankruptcy on a card then files bankruptcy, the creditor could file an objection, and the debt may not be discharged. In the worst-case scenarios, the debtor could be accused of committing bankruptcy fraud, which can be a federal crime.

Next: The Bankruptcy Means Test

If you have questions about credit card debt being included in a Chapter 7 bankruptcy, contact Arnold Law Group, APC by calling (559) 900-1263 today.

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