Scrounging for funds during the holiday gift-giving season is taxing enough for people on a budget. Introduce bankruptcy into the scenario, and individuals will be challenged to buy holiday gifts, purchase plane tickets to visit relatives and pay for the culinary feasts that accompany the festivities.

Fortunately, people who file for bankruptcy, whether it is Chapter 7 or Chapter 13, can still make financial ends meet during the holidays. Celebrating the joys of the season takes strategy and planning, even for individuals stuck on a rigid monthly repayment plan for the next three to five years.

1. Understand Challenges

Disposable income is defined as the end-of-month cash a person possesses after paying all obligatory expenses as well as reasonable ones. Normally, disposable income is spent on the season’s gifts, charitable contributions, and travel. But in bankruptcy cases, this excess income goes to creditors.

Restrictions are imposed on how disposable income may be spent, especially if purchases are considered unnecessary or unreasonable. Plus, in Bankruptcy 13 cases, the debtor must refrain from accruing new debt, except under pressing circumstances and only with the court’s permission.

Given the mounting expenses of the holiday season plus the tight restrictions of Bankruptcy 13, debtors will be hard pressed to get through the season without strain. Surplus cash may be obtained without resorting to borrowing from a bank or getting a loan.

2. Start Saving Early

Financial institutions provide assistance to debtors who aim to save a wad of cash before the holidays. Known as the “Christmas Club,” these programs incentivize account holders to make regular payments throughout the year. The interest is paid out in November, just in time for holiday shopping.

Programs, like the “Christmas Club” were popular decades ago. Now, mostly local credit unions offer similar programs. Be forewarned that such programs are known to pay meager interest. However, clubs do not charge fees, except in the cases of early withdrawal.

A similar alternative to the “Christmas Club” is the personal automatic savings plan offered by banks. A pre-set amount of funds specified by the contributor is automatically transferred into a plan, eliminating the need for manual deposits. Spending habits are managed, and funds steadily build up.

The key to building up substantial funds for the holidays is to start an automatic savings plan early. For instance, designating $10 each week into a plan at the start of the year provides the contributor with $520 by year’s end to allocate to holiday shopping and celebrating.

3. Use Tax Refunds

Spring is when the IRS sends tax refunds. Under Illinois law, debtors may claim a “wildcard” exemption of personal property and protect tax refunds. The trustee handling the case will unlikely seize the tax refund to repay creditors if the Chapter 13 repayment plan repays 100 percent of the debt.

However, the trustee appointed to handle a partial Chapter 13 repayment plan will seize the tax refund and repay creditors. The repayment plan approved by the court specifies the treatment of tax refunds. Under favorable circumstances, IRS refunds may be used to cover holiday expenses.

4. Buy on Credit

Credit card use helps debtors build a good credit score. It is critical that debtors pay off the debt on time each month. Banks offer a secured credit card, which requires a deposit that is linked to the credit limit. Holiday splurging may be accomplished with responsible credit card usage.

Filing for Chapter 7 bankruptcy discharges all credit card debt. Keep in mind that excess spending just prior to filing for bankruptcy is easily recognized by the courts and is severely frowned upon. The last thing debtors need is to face an allegation of bankruptcy fraud.

5. Modify Repayments

A Chapter 13 repayment plan may be modified so that payments are temporarily reduced and the savings are used for holiday spending. However, expect to pay hundreds of dollars in attorney fees to make the request to the courts. Plan on higher repayments to make up for the lower ones.

6. Gift Resourcefully

Presents may be given without a dime exchanged for them. Consider gifting personal services or homemade goods to holiday recipients. A special handmade craft or tray of home-baked goods are heartfelt gifts that will never run up additional debt and destroy the spirit of the season.

The holiday meal can be economically spruced up by requesting everyone pitch in for an appetizing potluck. Or, purchase a gift for one individual whose name is pulled from a hat, rather than spending extravagantly on multiple gifts for the extended family.

Debts can arise from any of numerous predicaments, from unexpected medical bills to major credit card spending. Filing for bankruptcy can help discharge all debts, especially if filing for Chapter 7 bankruptcy. Even with substantial income, filing for Chapter 13 bankruptcy may be necessary.

Work with a Bankruptcy Attorney

Lift debt and your spirits this holiday season by consulting a reputable bankruptcy lawyer from Berry K. Tucker & Associates, Ltd. Experienced lawyers from our Oak Lawn law firm successfully fight for the rights of countless area residents and effectively counsel many more.

We offer over 50 years of combined legal expertise in handling bankruptcy cases. Attorneys from Berry K. Tucker & Associates, Ltd. keep abreast of the changes to Illinois bankruptcy laws, ensuring clients receive the most qualified representation and legal advice. Our lawyers assess every unique situation and advise clients of their best legal options.

Berry K. Tucker & Associates, Ltd. have handled Chapter 7 bankruptcy cases involving car repossessions, credit card debt, medical debt, and home foreclosure judgments. We also represent clients filing for Chapter 13 bankruptcy and help them set up effective repayment plans.

Residents in the community of Oak Lawn, Illinois, trust the legal advice and qualified representation from the legal team at Berry K. Tucker & Associates, Ltd. When filing for bankruptcy the right way is important to you, consult our bankruptcy law firm to discuss your legal options.

Contact Us

To speak with one of our bankruptcy attorneys in the Oak Lawn, IL area, contact Berry K. Tucker & Associates, Ltd. at (708) 425-9530.