During the holidays, bankruptcy attorneys are less busy than usual. Debtors don't want to deal with the stress of filing bankruptcy during what's supposed to be a cheerful holiday season, unless they have to file for bankruptcy right away out of necessity. Come January 1st, the phones at bankruptcy attorneys' offices light up like Christmas trees.

Unlike any other part of the year, December presents unique challenges for people who are struggling financially, especially if they have a family. Debtors are tempted to put their holiday purchases on credit, but when they plan on filing for bankruptcy in January or even February, these holiday purchases can lead to questions over fraud and false misrepresentation.

Can holiday debt be discharged in bankruptcy?

Generally, when a debtor files Chapter 7 bankruptcy, they are able to discharge or "wipe out" all of their credit card debt so they can get a fresh start. When a credit card debt is discharged, it means the debtor doesn't owe the debt anymore.

However, there are exceptions to the rule, specifically when a debtor decides to file bankruptcy and then uses or even maxes out their credit cards with "no intention" of paying the credit card company back.

When credit card debt is charged up on "luxury goods" or cash advances shortly before filing bankruptcy, it's presumed to have been incurred through fraud. In other words, the debtor had no actual intention of repaying the debt.

If a debtor charges more than $650 of luxury goods on one credit card within 90 days of filing Chapter 7, the debt wouldn't be dischargeable. Almost anything could be considered luxury goods, with the exception of basic necessities, such as food, gasoline, and reasonable expenditures on clothing.

If a debtor takes out more than $925 in cash advances within 70 days of filing bankruptcy, the debt can be subject to challenge in court, even if it was used to pay for groceries or rent (something necessary).

For a credit card debt to be excluded from a bankruptcy, the credit card company would have to argue that the debt is non-dischargeable, and if the debtor responds, a hearing can be held. Otherwise, debts for cash advances and luxury goods would be discharged along with other dischargeable debts.

To learn more about credit card debt and the timing of filing, contact a bankruptcy lawyer today!