For many Americans, Christmas is a wonderful holiday spent sharing gifts with friends and loved ones. In some families, holiday gifts can include not only small trinkets but financially valuable presents, such as a car or cash. While most people don’t have to consider the effects of these contributions, people considering bankruptcy should.
There are two reasons in particular that debtors should take care when giving or receiving expensive Christmas gifts. First, people in bankruptcy are prohibited from paying some creditors ahead of others based on the debtor’s preferences. These distributions, known as preferential transfers, may violate the Bankruptcy Code’s carefully delineated order of payments. Making preferential payments can jeopardize your bankruptcy discharge and even put you at risk of criminal sanctions.
The second reason debtors should talk to their bankruptcy attorney about valuable Christmas gifts is that failing to report a meaningful change in your financial circumstances can also violate bankruptcy law. All of your assets should be accounted for in your schedules throughout the bankruptcy so that the bankruptcy court can ensure that a fair, just bankruptcy proceeding occurs. Failing to do so can also put your discharge – and your freedom – at risk.
Want to know more about how an expensive Christmas gift could affect you, your family, and your financial future? Talk to the dedicated attorneys and experienced professionals at Fears Nachawati today. We’re ready to give you the advice you need.