Debt can be all-consuming, and especially so when you’re anticipating additional expenses. When you’re struggling to make minimum payments on your credit card and watching the amount you owe increase, the idea of charging more for holiday gifts just adds to the stress.

If you’re tempted to charge up a storm on your Thanksgiving celebration and presents and then wave them away with a bankruptcy filing, you should think again — and talk to an experienced bankruptcy attorney about the repercussions of doing so.

Though consumer debt – debt on credit cards – can be discharged in a Chapter 7 bankruptcy, that does not give you free rein to charge up a storm in the days before your filing. Bankruptcy laws were written to provide debt relief and give people a fresh start in a way that keeps creditors on an even footing — not a blank check for last-minute spending.

To prevent people from taking advantage of dischargeable debt, there are rules for what can and can’t be included as a bankruptcy debt. The timing of when a debt is incurred is a key consideration of the bankruptcy courts: If cash advances or significant charges for luxury goods or services occur within 90 days of the filing, there’s a possibility of a presumption of abuse.

When there’s a question about the timing or intention of specific debts, your credit card company has the right to object to those charges, and the result could be that the court decides to exclude them from the amount that’s discharged in the bankruptcy. Even worse, your holiday debt could be considered fraudulent behavior that precludes your entire bankruptcy filing from being approved.

Here’s what to keep in mind: If you run up credit card charges of $725 or more within 90 days of filing your bankruptcy, and the items or services you purchased are considered non-essential or luxury items, there will be a strong presumption that they are non-dischargeable. The same is true of cash advances totaling $1,000 or more. This framework is specifically designed to prevent people from trying to abuse the bankruptcy program. If you can show that the charges were for essential items, the debt may be deemed dischargeable, but holiday gifts are not considered essential.

We are empathetic to the needs of people who are in debt and understand the frustration and stress that the holidays can add to your situation. For guidance on how best to manage your cash woes, contact us today to set up a time to talk.