The holiday season is here again. Today, I’m stepping away from the Bankruptcy Blog and blogging about some things I picked up over the years that may help you get through the holiday season.

Christmas is my favorite holiday! (Independence Day is a close second.) Here I am at 42 years old and I still look forward to Christmas as if I were 6. Of course, back then Christmas was all about leaving milk and cookies for Santa Clause in exchange for presents; preferably lots of toys. Today, it’s about spending quality time with family and friends and trying to create the same holiday memories for my children that my parents created for me. It’s also a time for me to reflect on the true reason I and many others celebrate Christmas, and that’s the birth of our savior Jesus Christ.

Not too long ago, I lost the Christmas spirit. I hated Christmas and dreaded its arrival at the end of each year! I went on a cruise one year just to avoid everyone. (Apparently, Christmas cruises are extremely popular.) I had become (bah humbug) . . . Mr. Scrooge!

How did Christmas go from being my favorite holiday to one I dreaded with despair? I can explain it in one word; materialism. It’s no secret retailers have hyper-commercialized the holiday season to take advantage of our holiday giving. Each year, it seems like the holiday inventory rolls out earlier and the holiday sales become less of a bargain. Coincidentally, I just read an article confirming my suspicions.

Whether it’s holiday shopping or holiday eating, it’s so easy to let our guard down and throw self-control out the window. In my case, I struggled with both. I love to shop just as much as I love to eat. Every year, I spent so much time, energy, and money buying gifts for a long list of family, friends, co-workers, neighbors, acquaintances, etc., etc. I even bought gifts for people I didn’t like! Most of the time I was motivated by a sense of obligation rather than a true desire to give. Exchanging gifts felt meaningless because I viewed it more as a trade or transaction. To me, a true gift is something given out of a desire to improve or benefit someone else’s life without any expectation of reciprocity.

After the holidays had passed and all the decorations were taken down, I would receive the damage report around mid-January. Opening each bill was a disheartening experience. My debt grew one bill at a time and I would be so angry I had spent so much. Not really how I wanted to start my new year! Looking back, I see how wasteful it was and I’m still angry with myself.

Finally, one year I had enough. I hated myself for hating Christmas and I wanted it to be special again. I wanted it to have meaning, and I wanted my children to grow up knowing we celebrate Christmas to honor the birth of Jesus Christ first as foremost. To get there, I (with my wife’s support) had to redefine how our family would celebrate Christmas.

First, I shortened the Christmas list. A lot of people got taken off the Christmas list not because they were naughty, but because I just couldn’t afford to buy everyone a present. Most gifts today go to my kids and their cousins. As for adults, my gifting is limited to those closest to me and only if I WANT to give them a gift. I will admit it does put you in an awkward position when you don’t exchange gifts with someone who has just given you a gift. However, some of this can be eliminated by having the conversation prior to the holidays. I think most people understand and appreciate when you explain that you limit who you buy gifts for over the holidays. It also relieves them of any obligation they feel they may owe you. But if you do get caught in that awkward situation, be gracious and say, “Thank you.” Let them know how appreciative you are. Later send them a thank-you note and maybe accompany it with some home-made baked goods, but only if you WANT to give. Also, remember to have a good attitude if you give a gift and don’t receive one in return. After all, you gave because you wanted, not because you expected a gift in return. 

After shortening the Christmas list, I started putting a little money aside each month specifically for Christmas. I wanted to get away from “Christmas on Credit.” It’s too easy to spend too much when you put it all on plastic. Unfortunately, at some point, the day comes when you have to pay the piper. Setting money aside specifically for Christmas eliminated the need to spend on credit. I now know my holiday budget well before going into the holiday season. By knowing my budget, I can plan my spending so I don’t have to rely on credit. I recently heard this piece of good advice, “There are two key factors to being a successful saver. First, set aside small amounts at frequent intervals. Second, don’t touch it!” It is a lot easier to save $20 every month than it is to come up with $240 at the end of the year. However large your Christmas budget, it is easier to build it up over 12 months than it is to come up with a lump sum at the end of the year. In doing so, you should be able to eliminate “Christmas on Credit” and the mid-January damage report. Now that’s a gift I can appreciate!

Those two simple things lifted a tremendous burden off my shoulders. Once again, I look forward to Christmas each year. Those who receive presents, receive better more meaningful presents, Christmas feels more traditional and less commercialized, and I stopped avoiding people during the holidays. Christmas can get lonely without friends and family to help you celebrate. After spending several years celebrating with only my wife, I can say I prefer Christmas with a larger crowd. Not that we had a terrible time celebrating Christmas’s on our own. We had a lot of fun and many good memories of quiet Christmas’s. But, it was selfish and Christmas is the one holiday where you should be putting others before yourself. Besides, it’s much more entertaining when you share it with others and you’ll have plenty of stories when you return to work after the holidays.

If you find yourself where I was a few years ago, here’s my advice to you. Sit down and think about how and why you celebrate the holidays. Ignore the pressure of social customs. Ignore the sense of obligation. Focus on what will make Christmas better for you and your family. Once you have a vision of how you want to celebrate Christmas, take steps to make it a reality. I wish you the very best this holiday season and Merry Christmas!

Not everyone qualifies for bankruptcy. Certain requirements must be met before you can obtain relief under the Bankruptcy Code. Whether you file Chapter 7 or Chapter 13, one of the first requirements of bankruptcy is the completion of a credit counseling course. Unless you are: 1) active-duty military, 2) incapacitated or have a disability which prevents you from participating, or 3) if the course is not available to you, you must complete the course within the 180-day period prior to filing your bankruptcy petition. A certificate of completion should accompany your Petition when it is filed. If not, the certificate may be filed within 14 days of filing the Petition. The credit counseling course provides financial counseling. That counseling includes developing a plan to pay all or a significant portion of your debts. Unfortunately, many debtors are unable to develop a viable plan so they proceed to file bankruptcy.


Means Test

If you choose to file bankruptcy under Chapter 7, the first major hurdle you will face is the Means Test. The Means Test is used to determine whether you can pay back some of your unsecured debts. You must take the Means Test if your current monthly income (CMI) exceeds the median monthly income for your geographic area. (I’ll explain the “Means Test” in depth at a later date.) Typically, individuals with higher incomes do not satisfy the Means Test.

If you satisfy the Means Test, then the next hurdle in the bankruptcy process is satisfying the Abuse Under All the Circumstances Test. (I’ll refer to this test as the Abuse Test.) Like the Means Test, the Abuse Test is used to determine whether you can pay your creditors. The difference between the two is that the Means Test is based on CMI while the Abuse Test is based on your actual income. Your CMI is the average monthly income earned over the 6-month period prior to filing bankruptcy. Actual income is just as it sounds. It’s what you actually make each month. If you fail to satisfy the Means Test or the Abuse Test, it is unlikely you will be allowed to seek relief under Chapter 7.

Wait Period

If you filed bankruptcy in the past and obtained a discharge, the Code bars you from filing a Chapter 7 bankruptcy for a fixed period. This is colloquially known as the “wait period.” If your previous bankruptcy was a Chapter 7, you must wait 8 years from when you filed the initial bankruptcy before you can file again. If your previous bankruptcy was a Chapter 13, the wait period decreases to 6 years from the date you filed the initial bankruptcy. However, if you filed the initial Chapter 13 in good faith and paid at least 70% of the unsecured debts before obtaining a discharge, then the 6-year wait period does not apply.

Other Barriers to a Chapter 7 Discharge

Keep the following issues in mind as well if you intend to seek debt relief under Chapter 7. You cannot file Chapter 7 if you had a previous bankruptcy dismissed within the past 180 days for the following reasons:

  1. you violated a court order, or
  2. you requested the bankruptcy be dismissed after a creditor asked for relief from the automatic stay.

Additionally, you cannot file a Chapter 7 if you attempt to defraud your creditor. Defrauding your creditors includes such things as giving property away (or selling it at an unreasonably low price) to friend and relatives, purchasing items without the intention to ever make payments, and hiding assets from a spouse during a divorce proceeding.



No Means Testing

If you decide to seek relief under Chapter 13, then you do not have to worry about the Means Test. The results of the means test will not prevent you from seeking relief under Chapter 13. In fact, the Means Test isn’t even applicable, since under Chapter 13 you will be using your disposable income to pay back some, if not all, of your unsecured debt.

Debt Limits

One of the first hurdles to overcome when filing bankruptcy under Chapter 13 is the size of your debt. Currently, the debt limit for secure debts is $1,184,200 while the unsecure debt limit is $394,725. If your debts exceed these amounts, then you will not be able to file bankruptcy under Chapter 13. Therefore, it is important to understand how your debts will be categorized.

Income Requirement

If your debts do not exceed the Chapter 13 debt limits, the next hurdle will be the income requirement. Chapter 13 bankruptcy requires you to have a steady source of income that will support a successful payment plan over the course of (depending on the circumstances) three to five years. Under the plan, all mandatory debts must be paid in full and unsecured creditors must receive an amount equal to what they would have received if the case had been filed under Chapter 7.

Wait Period

Like Chapter 7, if you filed a previous bankruptcy and obtained a discharge, there is a “wait period” that must toll before you can obtain another discharge. If your previous case was a Chapter 7 case, then you must wait four years from the date of filing before you can obtain another discharge. If your previous case was a Chapter 13 case, then you must wait 2 years. Unlike Chapter 7, which prevented filing until the wait period has tolled, you MAY file for Chapter 13 bankruptcy any time after the initial discharge. You just won’t get the discharge until the wait period has tolled, but you will be able to set up a payment plan.

Other Barriers to Chapter 13 Discharge

The final two hurdles of significance that will bar you from obtaining debt relief under Chapter 13 are income taxes and support payments. Your income tax filings are required to be up to date before filing and should remain current throughout the plan period. In regards to support payments (alimony and/or child support) any missed payments (arrearage) can be paid back over the course of the plan period. However, current payments must be kept up to date or you risk dismissal of your Chapter 13 case.

In Conclusion

Prior to obtaining your discharge, you will be required to attend a post-filing personal financial management course. If you complete the course, make all applicable payments, and satisfy the requirements of the Court and Trustee, your discharge should be approved.

Before filing bankruptcy, many factors should be considered to determine if bankruptcy is the right solution for you. This post discusses some of the bigger factors to considered but it is in no way an exhaustive list of factors. Speak with a bankruptcy attorney to learn about other factors that may affect your bankruptcy before you file.

Impact on Credit

One factor that almost everyone is concerned with is how bankruptcy will affect their credit. The simple answer is that a bankruptcy will negatively impact your credit and will stay on your credit report for 10 years. What does this mean? It means that it will be more difficult for you to get a loan for a house, car, or business. If you do obtain a loan or line of credit, it will usually be at a higher interest rate. However, this shouldn’t be a deterrent from filing. If you are considering filing bankruptcy, more than likely your credit is already less than perfect or on its way to being less than perfect. Many debtors who choose not to file bankruptcy struggle for several years to stay on top of their debt or preserve their credit only to end up filing bankruptcy anyway. They could have been well on their way to better credit if they had filed bankruptcy several years earlier. Even though bankruptcy will negatively impact your credit, you can immediately begin restoring your credit once you file.

Debt vs. Income

Another factor to consider is the size of your debt versus your income. If your income allows you to meet your basic needs and pay off your debts in a timely manner, you probably aren’t reading this post. If on the other hand you are missing payments and falling behind on your debt, you need to evaluate whether or not your income will allow you to get your debt under control. It’s possible a few changes to your budget will allow you to reign in your debt within a reasonable period of time. If that’s the case, bankruptcy may not be the best solution for you. However, if your debt obligation overshadows your income to the point that you’re not making any headway and you’re already living under self-imposed austerity measures, then bankruptcy may be the perfect solution for you. You shouldn’t struggle month after month with the burden of a debt you cannot repay. If this is your situation, then you’re just throwing away money until you file bankruptcy or find another solution to your financial woes.  

Type of Debt

The type of debt you possess should also be factored when considering bankruptcy. Your debt will fall into one of several categories of debt. Which category your debt falls into will determine whether or not the debt survives the bankruptcy. If a debt survives bankruptcy, you will still be liable to pay the creditor of that debt what is owed once the bankruptcy is finalized.  

Secured Debt

Filing bankruptcy will have little to no effect on certain debts. For instance, secured debts are generally not affected by bankruptcy. Secured debts are debts secured by collateral. Typical examples of secured debts are home mortgages and car loans. Because the debt is collateralized, the creditor has rights to the collateral if the debtor defaults on the debt.

Debts That May Survive Bankruptcy

Debts that may survive bankruptcy include support obligations for an ex-spouse or child, certain tax debts, fines for violating a law, personal injury debt arising from driving intoxicated, and student loans. Some debts, such as support obligations, will almost always survive bankruptcy. Others debts, such as student loans, may be discharged in bankruptcy but with considerable difficulty.

Unsecured Debt

Unsecured debts almost never survive bankruptcy and are typically discharged. Unlike secured debts, unsecured debts are not secured by collateral. Typical types of unsecured debts include credit cards, medical bills, judgments, and personal loans. Once these debts are discharged through bankruptcy, there is no longer any obligation to repay them.


It is possible you may not even need to file bankruptcy. Depending on your circumstances, a creditor may not be able to collect their debt from you regardless of whether or not you file bankruptcy. If you do not own anything that can be seized and if your income cannot be garnished, you are considered judgment proof.  What does it mean to be judgment proof? It means that even though a creditor can get a judgment against you, there is nothing the creditor can do to collect on that judgment except wait until your situation improves. The judgment remains uncollectable until it expires. That being said, you may still want to consider filing bankruptcy. Filing bankruptcy will stop creditors from harassing you. It will also eliminate the judgment so you don’t have to worry about it when things begin to improve.

Again, these are only a few of the factors for you to take into consideration when deciding whether or not you should file bankruptcy. To learn more about these and other factors that may affect you, set up a consultation with a local bankruptcy attorney.

Filing bankruptcy is a decision that should not be made lightly. Whether or not you decide to file, the decision you make will have a profound effect on many aspects of your life in both the near and distant future. Therefore, your decision should be deliberate and informed. Determine your overall goals. Learn the basics of bankruptcy. And, consult with a bankruptcy attorney.

First, you must determine your goals. What is it that you want to accomplish; eliminate all your debts, save your home from foreclosure, keep a certain piece property, etc.? By determining or defining your goals, you develop a vision of what it is you want to accomplish. Once you know what it is you want to accomplish, you can plan and take steps that will help you accomplish your goals.

Second, you need to learn the basics of bankruptcy. My resource page lists several links to sites that provide general information on bankruptcy. Once you understand the basics of bankruptcy, ask yourself, “Can I achieve my goals without filing bankruptcy?” Generally, bankruptcy should be left as a last resort. It is quite possible your goals can be accomplished without having to file bankruptcy. This is where it is helpful to consult with a bankruptcy attorney. A bankruptcy attorney should be able to look at your circumstances in conjunction with your goals and advise you on your available options. Many of us offer free consultations so take advantage of it.

Finally, (as stated above) consult with a bankruptcy attorney. There are numerous factors that should be considered and weighed in your decision to file. A bankruptcy attorney can shed some light on those factors and help guide you through the decision making process. Keep in mind that no attorney should make the decision to file bankruptcy for you. At the end of the day, the decision to file bankruptcy is a personal one that you alone should make.