Milwaukee, WI Bankruptcy Law Blog

Tuesday, December 19, 2017

Buying Christmas Gifts Before Filing for Bankruptcy

Would It Be Wrong To Buy A Bunch of Christmas Gifts Before Filing for Bankruptcy?

It is easy to rack up a lot of debt around the holidays, particularly since today’s high-tech toys all seem to cost an arm and a leg. So, if you know you are going to file for bankruptcy in the New Year, why not go all out and max out your credit cards on behalf of your loved ones?

The answer is you might get busted for fraud. Taking on debt that you don’t intend to pay back is fraud, and it’s illegal. It doesn’t matter if your sister’s husband’s cousin got away with doing something similar, the odds are that you will get caught if you try something like this because the courts are wise to this scheme, and they carefully check credit card records to root it out. 

The period that is scrutinized most closely is the 90 days before a bankruptcy case is filed. Any “luxury goods” that are purchased during this period can be presumed to have been purchased in bad faith, meaning without the intent to repay the debt. Some courts consider anything other than basics like food, gas, and medicine to be “luxury items,” so it is best to be careful about what you are spending money on if you plan to file for bankruptcy in the near future. 

If you get caught trying to sneak in some purchases before you file for bankruptcy, you will be punished. Worst case scenario, you get thrown in jail. This is a punishment mostly reserved for frauds that reach into the millions dollars, but there is nothing in the law that says it can’t happen to small-time scammers. Best case scenario, you have to pay off all that credit card debt instead of having it forgiven like other debts in your Chapter 13 or Chapter 7 case. Most likely scenario, your bankruptcy case gets thrown out of court and you must wait to file again. 

If you are contemplating bankruptcy, you should really stop using your credit cards except for emergencies. And as much as it can hurt to admit it, gifts for family members aren’t emergencies. In the long run, it will be better for your family if you start to curb your spending and get back on the right track, than to go for one last hurrah.

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