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Happy Holidays from a Bankruptcy Point of View

Blonde woman holding credit card and christmas gift with computer and christmas tree in background

This season brings out the best – and regrettably sometimes the worst in individuals. For example, in the effort to “enjoy the season” we often go overboard and spend well beyond our means which can create havoc just a few short months from now. Those who believe that a bankruptcy petition create a free pass sort of speak on this issue might be surprised to learn that credit card companies and financial institutions routinely examine spending patterns around the holidays to determine whether or not to challenge a bankruptcy. 11 U.S.C. Sec. 523 (a)(2) states that debts incurred by fraud (often interpreted as incurring a debt with no intention or a rational method of repayment) can be held non-dischargeable. Simply stated, the law prohibits one from racking up debt and then just wiping it out.

Like all aspects of the law, there are twists and turns in this analysis and creditors do not always pursue even legitimate cases. However, the word to the wise is to not incur debts with the anticipation of bankruptcy. The defense (even if ultimately successful) of an adversarial proceeding by a financial institution to declare a debt non-dischargeable can be a very costly and stress inducing event.

Many people also put off their necessary bankruptcy filings this time of year, either because of the competing financial pressures or simply the desire to avoid dealing with such “unpleasantness” at what should be a joyful time. Our offices routinely see a significant spike in cancellations or no show appointments starting in early December. This as well can create tremendous difficulties just a few short weeks ahead as the creditors are not taking a holiday. Foreclosure are still moving ahead, lawsuits and garnishments are still being processed and repossessions seem to increase around this time as more people (and their vehicles) can be easily found at home.

While we certainly understand how difficult this decision or process can be for people, the reality remains that doing nothing or needlessly delaying it in the vast majority of cases creates far worse situations than the actual filing itself. In the end, Bankruptcy is a positive step forward to protect one’s self from creditors who can destroy or take the very things that Bankruptcy saves. A bankruptcy’s stated purpose is to offer one a fresh start in life. To that end, I often remark that is is the perfect Holiday gift.

Very Good Wishes for a joyous season.