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A Chapter 13 bankruptcy doesn’t need to ruin your holidays

On Behalf of | Nov 13, 2021 | Bankruptcy |

If you’ve just recently filed for Chapter 13 bankruptcy or plan to have your filing complete before the end of the year, you’re likely wondering if this will be a Christmas of homemade gifts, regifting and coupons for free hugs. While all of those things can certainly help with your new budgetary constraints, you have a little more leeway than that. You do, however, need to be careful.

If you’ve already filed for Chapter 13, you have a three-to-five-year repayment plan that includes a budget. Living within your new budget is essential for completing your bankruptcy successfully.

Can you still buy gifts?

Forget about putting any Christmas spending on a credit card. Taking on any new debt is typically prohibited unless it’s a necessary expense and you have prior approval. So if you can’t pay cash for a gift, don’t buy it.

Is there even room in a Chapter 13 budget for gifts? There is, but you may have to be creative. A Chapter 13 budget allows for housing, food, clothing and other necessary expenses as well as some miscellaneous purchases. For the next few years, your family’s gifts may have to consist of coats, shoes and things they need for their wardrobe. You can also work some small gifts into that miscellaneous category.

If you have a large, extended family that you may not want to share news of your bankruptcy with, you can simply tell them that you’re on a tight budget and suggest a Secret Santa or White Elephant gift exchange to cut down on the number of gifts you’re purchasing.

Be careful if you haven’t yet filed

If you haven’t filed yet, don’t consider buying all of your gifts first with one last blowout on your credit card. That is considered bankruptcy fraud, and it will be noticed by your bankruptcy trustee. In addition to being responsible for all of that last-minute debt, you could face a $250,000 fine and even jail time.

A lot of people, whether they’ve filed for bankruptcy or not, are tuning out the ubiquitous retailers’ ads and making Christmas (or whatever holidays you celebrate in your family) about the spirit of the season. If you have to do some holiday gift-giving, just make sure that you get the guidance you need first rather than risk making a potentially serious mistake.