Holiday Spending and Timing a Bankruptcy Filing

November 8, 2010

By: David M. Serafin

As a Denver bankruptcy lawyer, when handling chapter 7 matters, I’ve been recently asked by a handful of clients about waiting until early 2011 (when the credit card bills from holiday spending come due) so that all credit card debts can be discharged.

However, as per Section 523 of the Bankruptcy Code, any credit card or other consumer debts (not deemed to be necessities such as food, utilities or medical bills) incurred 90 days prior to a bankruptcy filing cannot be discharged. This, of course, creates a timing issue.

For debtors who do not anticipate a high amount of holiday spending and who are being frequently harassed by creditors, an immediate filing in Colorado Bankruptcy Court may make sense.

Conversely, debtors who expect to have high credit card bills from holiday spending may wish to wait 90 days or more after the bulk of the consumer debt is incurred to file for bankruptcy.

Sometimes, after receiving an Objection to Discharge from a creditor, it’s fruitful to meet with a client to determine how much, if any, of the recent debt incurred is attributable to consumer goods. A recent chapter 7 client was able to show me receipts and credit card statements demonstrating that 100% of the debt in question was attributable to medical bills incurred, after which the creditor withdrew its objection.