We're hearing a lot lately about the fiscal cliff that the country is about to plunge over if Congress doesn't act before December 31. Many people might be facing their own fiscal cliffs with the coming holiday season. This is a time for giving but don't get carried away by all the marketing hype. If your finances are precarious, this is not the time to throw caution to the winds and spend recklessly.
Some may have the idea that they can run up a large credit card bill, have a great holiday season and then declare bankruptcy. That would be possibly the worst thing you could do from a financial standpoint. Creditors look closely at expenditures just before a person files bankruptcy with an eye to objecting to the discharge on the grounds that the debt was fraudulently incurred. A debt is fraudulently incurred if, among other things, the debtor knew or should have known that she couldn't pay the debt at the time it is incurred. Filing right after running up a big credit card debt, especially for non-necessities such as gifts, movies, dining or luxury items is an indication that the person knew she wouldn't be able to pay those debts.
Even worse, the United States Trustee might look into the case and decide to challenge the entire bankruptcy as opposed to a single debt. Or, in the worst case scenario, the Trustee refers the case to the Department of Justice for possible prosecution as bankruptcy fraud. That's a federal crime punishable by imprisonment.
Remember that bankruptcy is intended for the honest debtor who simply can't make ends meet. It isn't meant as a way of letting someone have their cake and eat it too. This holiday season make sure to use your common sense before you use your credit cards.
No comments:
Post a Comment