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Should you file for bankruptcy before or after the holidays?

This year, many retailers have a reason for concern this holiday season. Sears recently ran into financial trouble, and the company has tried to remain above water at least through the holiday season. 

You may have your own financial problems to deal with this year. With the holidays right around the corner, you may wonder whether it is an optimal time to file for bankruptcy. Timing is everything when pursuing this course of action, and you should seriously consider filing for bankruptcy before the holidays arrive.

You cannot spend money on gifts and have bankruptcy dissolve it

Many people believe they can get away with spending a lot on their credit cards for holiday shopping and have bankruptcy dissolve it later. That is not the case. The Bankruptcy Code has a rule stating that any debt incurred within 90 days of filing for bankruptcy does not receive forgiveness. You should try to file for bankruptcy 90 days after your last major purchase to try to get as much forgiveness as possible, but you need to consult with your attorney before pursuing any action.

The court could accuse you of fraud

If the court sees that you intentionally accumulated more debt before filing, then it could lead to a lot of legal trouble. The court considers it a misrepresentation of your situation, and it may not allow you to discharge the debt if this is the case, especially if the credit card company contests the charges. You should avoid using your credit card at all costs immediately leading up to bankruptcy. 

You could lose cash gifts

It is also good to file for bankruptcy before the holidays if you plan on receiving a sizable cash gift, and that can include a hefty holiday bonus from your employer. When you receive money after bankruptcy, it does not factor into anything. Additionally, cash gifts can temporarily increase your income for the previous period, affecting how much debt you can write off.

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