How Long after Christmas Should You Wait to File Bankruptcy?

Bankruptcy after the holiday season is very attractive for many debtors, and for good reasons. Bankruptcy is a good time to purge debt, especially from credit cards, and get personal finances under control. However, timing your bankruptcy after Christmas can mean the difference between a fresh start and a false start.

The Bankruptcy Code provides that credit card purchases for “luxury goods or services” totaling more than $650.00 (“in the aggregate”) within 90 days prior to filing a bankruptcy case are presumed nondischargeable debts and will survive the bankruptcy discharge. See 11 U.S.C. § 523(a)(2)(C)(i)(I). However, the Bankruptcy Code goes on to state that “luxury goods or services do not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor.” See Section 523(a)(2)(C)(ii)(II). That means if a debtor purchases twenty dollars in food from the grocery store, that charge is not be counted toward the aggregate of “luxury goods or services.” By the plain language of the Bankruptcy Code, if a debtor charges over $650 on one credit card for food, gas, and other necessary items, there is no presumption of nondischargeability.

A presumption is just that, the creditor must first file a complaint against the debtor. To get the presumption, all the creditor must show is evidence of credit card charges totaling over $650 in the 90 days before the bankruptcy filing. That said, for many creditors the costs involved in contesting the debtor’s discharge may exceed the benefits from having the debt excepted from discharge.

While there are many good defenses to a creditor’s presumption against discharge, the best advice is generally to wait to file bankruptcy until a full ninety days after your last charge. Additionally, pay at least the minimum monthly on your credit card, if you are able. The best time to prepare to file bankruptcy is now, but the best time to file after Christmas may be the last part of March. As always, speak with your bankruptcy attorney about the specifics of your case.