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Two Reasons to File Bankruptcy in January

Ask a consumer bankruptcy attorney the question, “When is the best time to file my bankruptcy case?” and the most likely answer is “Today!” After all, delay in filing a bankruptcy case often causes complications such as lawsuits, garnishments, repossession, and foreclosure. But every case is different, so let’s look at why January may be a good time for some debtors to file bankruptcy.

Tax Debt
Income tax debt for 2013 is not owed until after December 31, 2013. Consequently, if you are expecting to owe a large tax debt for 2013 and want to pay it through a Chapter 13 bankruptcy case, you should wait to file until January 1 (or after. First, take the day off and watch the parades and football games). A Chapter 13 case filed before January 1, 2014 does not include 2013’s tax obligation as a pre-petition debt.

Discharge Holiday Spending Debt
Historically, Americans spend more in the month of December than any other month. According to, Americans spend almost $10 per day more in December for store and online purchases, and in restaurants than January through November averages. That’s an extra $300 that often ends up on a credit card.

Bankruptcy can eliminate credit card debt, but there are some rules. First, high use of credit immediately before filing bankruptcy may draw the attention of the credit card company. The Bankruptcy Code specifically addresses using credit before bankruptcy and it states that credit card purchases for “luxury goods or services” totaling more than $650.00 within 90 days prior to filing a bankruptcy case are presumed non-dischargeable debts and will survive the bankruptcy discharge. HOWEVER, the Bankruptcy Code goes on to state that “luxury goods or services do not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor.”

$50 on a credit card for gas to get to work is not a luxury purchase.
$3,000 for a holiday cruise is a luxury purchase.

If you charge over $650 on your credit card for food, gas, and other necessary items, there is no issue. However, if you do not charge more than $650 on one credit card within 90 days before the bankruptcy filing, there is not presumption of non-dischargeability, and you won’t have to worry about explaining your charges.

CAVEAT: If you have consulted with an attorney and have decided to file bankruptcy, you should stop using your credit cards. Using credit when you have no intention on repaying the debt is fraud and the charges may be excluded from your bankruptcy discharge. It could even lead to a criminal charge! For more information and a free consultation call the experienced attorneys at Fears Nachawati by calling 1.866.705.7584 or by sending an email to