Things You Should Know Before Filing Bankruptcy in the Winter

Bankruptcy is a very powerful tool that helps millions of Americans get relief from crushing debt every year.  The ultimate goal of a bankruptcy is the bankruptcy discharge, basically an order prohibiting the affected creditors from ever collecting on a discharged debt.  December is typically a slow month for bankruptcy filings, but the subsequent months might be even worse, depending on your situation.

If you used your credit cards for Christmas, they may be nondischargeable. - 11 U.S.C.§ 523(a)(2)(C)(i)(I) states that consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable.

Likewise, if you got cash advances for Christmas, the debt may be nondischargeable. - 11 U.S.C.§ 523(a)(2)(C)(i)(I) states that cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable.

If neither one of those fit your situation, creditors will sometimes ask that a debt be declared nondischargeable due to fraud.  They will essentially say that you made misrepresentations about your financial condition when using your credit cards and you knew that you would be unable to make the payments.  They generally use  11 U.S.C.§ 523(a)(2)(A) to argue this, which states that a discharge does not apply to any debt for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.

If you are considering filing bankruptcy, the longer that you wait between credit card usage and filing your bankruptcy the better.  If you used any credit card for more than $500, it is best to wait at least 90 days before filing your bankruptcy.

If you receive large tax refunds, it might make since to wait until after you have received it and spent most of it.  Chapter 7 bankruptcy is a liquidation bankruptcy.  You turn over all of your unexempt assets over to the trustee.  The trustee may liquidate any unexempt asset that you have the right to receive within 6 months after the filing of the bankruptcy petition.  If you are filing bankruptcy during the winter months, one of the assets may be your tax refund.  The amount of what is exempt depends on state law.  For instance, people in Georgia may be able to protect up to $5,600 pursuant to O.C.G.A. §44-13-100(a)(6), however Louisiana residents can only protect the portion of their refund attributable to the earned income credit, and Florida residents who own a home can only exempt $1,000 in personal property (this includes furniture, clothing, cash, and tax refunds).  Many jurisdictions require Chapter 13 debtors turn over all or most of their tax refund to the trustee every year that their case is pending.

If you generally get large tax refunds, it might make sense to wait to file your taxes until after you have received and spent most or all of the tax refund.  That does not mean that you should go spend the refund as fast as possible for the purposes of filing bankruptcy.  The trustee may ask you to show where you spent the money and can seek judgement against friends and family that have been paid with the refund or even ask that your case be dismissed for fraud.  You can use the money to pay utility bills, catch up rent payments or car payments, make minor home and car repairs, etc.

If you are considering filing bankruptcy, Simplified Document Solutions can help you get a bankruptcy discharge for a low flat $249 fee.  To get more information, please call Charles at (678) 490-5841 or visit our website at www.249bankruptcy.com.


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This is intended as general information, not legal advice.  Your situation may have complexities that are unknown to the author and have not been considered in this blog.  If you have specific questions about your situation, you may wish to obtain information from competent counsel.

What will bankruptcy do to my credit?

            One of the most common questions I am asked when people are considering bankruptcy is “What is going to happen to my credit?”

            The answer is “it all depends.”  There are numerous different scoring models, created by many different companies.  The most common is the FICO score, created by the Fair Isaac Corporation.  Unfortunately, Fair Isaac Corporation and their competitors do not disclose the formula used to calculate your credit scores, so nobody can tell you exactly what will happen to your credit score when you file.

            Some people file bankruptcy while their credit score is still very good.  For instance, if you have always paid your debts on time and have a significant amount of debt, your score may be very high.  However, if you have lost your job and know that you will not be able to make payments going forward, you may consider bankruptcy.  If this describes you, you will likely see a decrease in your credit score, simply because a perfect credit score has nowhere to go but down.

            However, most people who file bankruptcy have several late payments, repossessions, foreclosures, collection accounts, judgments, and/or charge offs on their credit report when they make the decision to file bankruptcy.  These people go into bankruptcy with a very low credit score and they actually see an increase in their credit score, simply because it has nowhere to go but up.

            When creditors see that you have filed for bankruptcy, they see you as a good credit risk.  First, all of your accounts will show a $0 balance and a $0 monthly payment, leaving you more money to pay your new debt.  Secondly, you can only file Chapter 7 bankruptcy once every 8 years, so they know that if you fail to pay, they can simply garnish your wages or bank account without fear that you will file Chapter7 again (although you may be able to file a Chapter 13 before then).  Third, they are not concerned that another creditor will garnish your wages or bank account leaving you without money to pay them.  Finally, people who file a Chapter 7 generally are trying to reorganize their life, pick up the pieces, and turn over a new leaf.

Often people think that they will not be able to get credit for ten years after bankruptcy.  That is simply not true.  While it is true that a bankruptcy shows up on your credit report as a public record for 10 years, the impact will be reduced as time goes on.  In fact, most of my clients receive offers to obtain credit cards or purchase cars right after filing bankruptcy, often at better interest rates than their friends and family who have not filed bankruptcy.  If you maintain any new accounts that you get after your bankruptcy discharge, you will have excellent credit in no time!

If you would like to discuss your specific situation, contact Simplified Document Solutions-$249 Bankruptcy  by calling (678) 490-5841.