Why You Should File Bankruptcy at the Beginning of the New Year

If you ask any bankruptcy lawyer what they feel the best time is for filing bankruptcy, you’ll likely hear a resounding, “Now!” In truth, waiting around to file bankruptcy increases your risk for wage garnishments, lawsuits, auto repossession, and even foreclosure of your home. The New Year is here now, and there are many reasons why you should consider the first quarter as a good starting point for filing bankruptcy.

Purge Debt from the Holidays

It’s currently estimated that Americans spend nearly $10 more on average each day in the month of December than they do in any other month of the year. When added up, this creates a $300 increase in spending that is likely done with a credit card. This is why it makes sense to file for bankruptcy at the beginning of the New Year.

Credit Card Debt Specifications

As you would assume, there are some stipulations that come along with purging credit card debt. Credit card companies are savvy when it comes to borrower deception, and many will notice unusually frequent use of credit just before a borrower files bankruptcy. Some purchases made just prior to bankruptcy may be legitimate. The Courts look at your intent, which means when you incurred the debt did you have the intention and means to pay it back.

I always advise my clients that when they decide to file for bankruptcy they should stop using their credit cards and also stop paying on them. This way the funds that were being paid to the credit cards can be used to cover the attorney and Court fees to get the bankruptcy case filed.

It is further detailed in the Bankruptcy Code that goods and services are not labeled under “luxury” if they are absolutely necessary to the borrower or a dependent of theirs. For example, gas for work travel that is charged to a credit card doesn’t qualify as being a luxury expense. 

If you carried a credit card balance of over $650 for goods such as groceries, gas, and home necessities, you would be in the clear. Not carrying a debt over $650 will prevent you from having to even explain any charges in the first place.

Something to Think About Before Your File Bankruptcy

Once you make the decision to work with an attorney on a bankruptcy case, cease use of your credit cards at once. Using credit while you are openly filing for bankruptcy is a direct indication that you likely have no intentions of paying it back. This is known as fraud, and you could easily be charged in a court of law for doing this.