Spending over the holidays can be tough on many budgets, but it's particularly complicated for individuals who plan on filing or have already filed for personal bankruptcy. While these legal options help eliminate or restructure debts, they also pose a variety of limitations that may impact the way you give and receive gifts. Fortunately, with the right preparation, you don’t have to forgo the festivities altogether. Here are a few important details to know about holiday shopping and bankruptcy.

How Will Filing for Bankruptcy Impact Your Holiday Shopping?

Gifts May Be Taken Away

Use caution before accepting any gifts, especially those that are cash or carry a high value. Cash gifts may influence your means test by increasing your total income. If the amount is too high, you may not qualify for Chapter 7 bankruptcy, the option that eliminates most debts. Instead, you may only qualify for Chapter 13, in which you have to repay some or all of your debts under a structured plan.

Expensive gifts, such as new cars, may also be liquidated and seized by the trustee to help pay for debts.  

Credit Should Be Off-Limits

Don’t use credit cards for non-emergency purposes before filing for bankruptcy. Doing so can make it look like you have no intention of paying the balance back and are making a fraudulent bankruptcy claim.

Stay Aware of Extra Work

If you plan on working extra to help cover holiday shopping, calculate how it will impact your total income earnings. If you earn too much, your upcoming means test may disqualify you for Chapter 7.

Strategies for Holiday Shopping After Filing for Bankruptcy

Set a Budget

To avoid spending too much, make a list of everyone for whom you want to purchase gifts. Next, establish a strict budget to ensure you don’t overspend on any person.

If you’ve filed for Chapter 13, much of your income will be used to make debt payments. As such, you may also want to start saving small amounts as soon as possible to ensure you have enough to buy gifts.

Don’t Open New Credit Cards

While it’s technically possible to open new credit cards or qualify for a loan after a personal bankruptcy, they can carry high-interest rates and cause you to enter another cycle of debt. Stick to cash payments only to maintain solid financial footing.

Navigating holiday spending decisions is less stressful when you have the support of Donald L. Spafford Jr., Attorney at Law. Serving clients in Honolulu, HI, for over three decades, this bankruptcy attorney will help you prepare for the filing process and outline financial choices that will improve the outcomes of your case. To learn more about his personal bankruptcy services, visit this Oahu attorney online or call (808) 532-6300.