Bankruptcy attorneys’ phones don’t ring as much around this time of the year. I don’t have any hard and fast data to back me up, but I can think of a few reasons why people wait until the beginning of the new year to file their bankruptcy petition.
First, they’re worried they’ll lose their tax refund. In Colorado, your tax refund isn’t protected from the bankruptcy trustee (what’s known as being exempt). That means the trustee can tell the IRS to send them your refund, and they’ll turn around and give it to your creditors. One of the easiest ways to keep your tax refund is by simply waiting until you’ve gotten it, spend it appropriately, and then file for bankruptcy.
Another reason fewer people file around this time of year is that the flurry of back-to-school and holiday activities have their mind other places, and they’d rather not have to think about their financial situation. Besides, with a new year comes hope for a new beginning.
But the last reason I think people wait to file until after the new year is that they think they can get rid of all the credit card charges for the Christmas presents they bought. Sounds like a good strategy, right?
Unfortunately, the Bankruptcy Code anticipates this kind of thinking. There are two exceptions to discharge that you should be aware of before you try getting rid of these kinds of credit card charges. Under Section 523 of the Bankruptcy Code “consumer debts owed to a single creditor and aggregating more than $600 for luxury goods or services incurred by an individual debtor on or within 90 days before [filing]” and “cash advances aggregating more than $875 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before [filing]” are presumed nondischargeable.
What that means is that if a creditor objects to your charges for all those presents (including cash received from cash advances), you’ll be stuck with them after bankruptcy.
The better course is to either file bankruptcy before Christmas so you have all that money you’ve been paying to your creditors available to buy presents, or go ahead and wait until the new year, just don’t use your credit card to buy presents.
