The holidays can be stressful even if you are good financially. You probably worry about what to buy your kids and how much you should spend. If you don’t have the cash, maybe you consider using credit cards for holiday shopping. Such questions become magnified if you are going through a Chapter 13 bankruptcy case. For the 12 months ending September 2017, there were nearly 300,000 Chapter 13 bankruptcy filings. With all the expenses and restrictions that come with a Chapter 13 filing, you might wonder if it’s even possible to celebrate the holidays. Well, it is possible but it is going to take planning and attention on your part.
Chapter 13 Restrictions
A Chapter 13 bankruptcy filing essentially means a payment arrangement. You will be required to repay your creditors. Once your disposable income is determined, that income is committed to a monthly payment plan. During Christmas, most people use their disposable income to buy gifts and partake in fun events. However, during a Chapter 13 repayment, those involved are restricted.
Avoiding New Debt
Those who are in Chapter 13 bankruptcy are on a restricted budget. Taking on new debt during the repayment period is discouraged. However, because money is so tight during this time, it may be necessary for a debtor to take on new debt. In order for this to happen, the debtor must have a very good reason for doing so. You will not be able to obtain credit to buy your child the latest gaming console or another big ticket item.
Surviving The Holidays
So, if you’re involved in a Chapter 13 case, just know that although the holidays will be difficult, you can get through them. There are several strategies to help you get through the holidays and be able to enjoy them with your family.
- Save your money. With diligent effort, it’s possible for you to save a small amount each month several months before the holidays arrive. It might not be much, but every little bit in this situation helps. Often, banks will have a Christmas Club account which requires you to make small monthly deposits which can really add up over time. Another option your bank may offer is a round-up program, where purchases are rounded up and the extra change goes into a savings account.
- Modify your Chapter 13 repayment plan. You may be able to get your monthly payments reduced for a month or two to give you some extra cash for Christmas spending. Keep in mind, however, that a payment plan modification will require your attorney to file paperwork to request the modification which could cost you several hundred dollars. Also, a reduction in payment will mean higher future payments to make up the difference for a couple of months of lowered payments.
- Borrow from your retirement account. This is probably the last thing you want to do, especially for holiday spending. But, if you really feel you need the money, it is an option. Your attorney will need to file a request with the court for permission to be granted to you in order to borrow this money. You will also be required to pay this money back to your retirement account.
- Use your tax refund. Even though you probably file your taxes in the spring and receive your refund shortly thereafter, you can execute a plan to save a portion of your refund for holiday spending. This income is also considered disposable income and can be taken to repay your creditors. However, your trustee may allow you to keep some of the money which can be saved for the holidays.
The holidays should be a time for togetherness and happiness. Even if you don’t have a lot of money to spend, remember what’s important and enjoy the company of your family and friends.