New Year’s Day ushers in a set of resolutions, but planning ahead can make a big difference if one resolution is filing bankruptcy here in Florida. Whether one is shopping for gifts or knows that they are likely to receive them, it can make the filing less complicated if they treat this holiday season differently.
Receiving gifts
Those planning to file bankruptcy in January may want to discourage others from giving them expensive or generous gifts. For example, a family member may be aware of financial difficulties and offer a large cash gift, but this can be a mistake. A large influx of cash could impact the filer’s ability to pass the Chapter 7 means test, which discharges the debts faster with less obligation than under the debt restructuring of Chapter 13. Even if it does not affect the Chapter 7 means test, that cash would likely be seized to pay creditors. It may make more sense to defer a gift until later, using that money to reestablish credit and build a nest egg.
Those who receive luxury items over the holiday may also have to face hard decisions. If they plan to file Chapter 7, new luxury gifts may be liquidated. However, average toys, clothes, household items would be safe. If the future filer is not sure, they can protect their interests by consulting with a bankruptcy attorney before accepting a generous gift.
Shopping for others
It is harmful to run up credit cards or take on any new debt during the holidays. Even if the gift-giving is typical of previous years, these purchases could be looked upon as an attempt to defraud creditors. They could cause unnecessary complications when it comes time to file. Moreover, a large cash gift could be construed as a fraudulent transfer of cash. Generally, it is best to be modest in gift choices and pay cash.
Planning to file Chapter 13?
Those restructuring their debt under Chapter 13 will not be so closely scrutinized, so those who plan to file can give and receive gifts. However, it often is most helpful to earmark all disposable income for paying down the debt. Other options are to either set aside a small amount of money each month for buying small gifts or be creative about the gift and perhaps make something (food or a handmade item) instead of buying a gift.
Do not let bankruptcy ruin the holidays
Some people do not like talking about their finances, but being honest with family and friends is a much wiser course of action than pretending there are no financial issues. It also may lighten the mood to speak with a bankruptcy attorney who can help plan a fresh start in the new year.