Should You File For Bankruptcy to Pay Off Holiday Debt?

The holiday season implies unlimited fun with friends and family. It means shopping, merry-making, cozy family dinners, vacations, lots of gifts, and loads of love. However, the cost of the holiday season’s entertainment binge can eat up your savings and put you into debt.

The average holiday debt in 2019 was $1325. Consumers rack up a huge amount of debt every year during the holiday season and according to experts, it may take several years to pay it off.

How can you pay off your holiday debt?

If you get into debt due to overspending, you may be able to use these 4 tips to pay it off.

  1. Contact certified credit counselors for advice.

Call and schedule an online meeting with credit counselors. Discuss the problem you are in with your debt. Provide information about your income, expenses, and outstanding obligations. Counselors may be able to suggest a customized budget to generate free cash and pay off holiday debt.

  1. Ask creditors if they have any hardship programs.

Call your creditors and ask if they have any hardship programs. In a hardship plan, creditors give you a new repayment plan wherein you pay off the debt at a low-interest rate over a specified period. Usually, creditors waive off late fees and penalties.

  1. Call your creditors and ask them if they are willing to settle your debts.

Call your creditors and explain that you are in financial hardship. As such, you do not have money to pay off the entire debt. You can request creditors to accept a partial payment on the debt and consider it as paid in full.

  1. Pay off your debts with a balance transfer card.

You can pay off the entire balance with a 0% interest balance transfer credit card. You can research all the available balance transfer cards online and shortlist them. Apply for the one that is giving you the best offer.

Most balance transfer cards come with a teaser rate of up to 18 months. You have to pay off the transferred debt within that time. If you fail to pay off the debt within the timeframe allowed, then you have to pay the interest rate of the card on the remaining balance.

A couple caveats with a balance transfer card (1) you have to have a decent credit score to qualify and (2) after the promotional period the interest rate is usually high.

Can bankruptcy help you discharge holiday debts?

Bankruptcy should be considered your last resort to pay off debts. You should consider filing only when creditors have refused to offer an affordable repayment plan or settle your outstanding debts.

Bankruptcy hurts your credit score big time. It pulls down your credit score by around 200 points. Plus, Chapter 7 bankruptcy stays in your credit report for 10 years while Chapter 13 bankruptcy stays in your credit report for 7 years.

It could give a hidden message to potential creditors that you cannot manage your bills responsibly. You can learn more about Chapter 13 bankruptcy at the Oak View Law Group website.

Bankruptcy can help you discharge debts.

However, you should consult a local attorney because it is a complex legal process and there are many steps to file for bankruptcy. If those steps are not followed according to the bankruptcy laws the court will deny your case.

You will also have to prove to the court that the debt is genuine and is not something that you have incurred with the intention of filing for bankruptcy.

Should you file for bankruptcy to pay off holiday debts?

The simple answer is ‘no’.

You should try to set up a repayment plan with creditors to clear your holiday debts.

If that doesn’t work, then you can try to settle your debts.

The balance transfer method is also open to you.

If none of the above options work, and you don’t think there is any way to avoid bankruptcy then you need to schedule a free consultation with an experienced bankruptcy attorney.

How to avoid holiday debts this year

Reckless shopping leads to holiday debt. Record-breaking holiday shopping brings unhappiness to the financial lives of consumers every year.

The pandemic has already brought in serious financial problems in the lives of people. If you do not want to bring more problems to your life, then avoid holiday debt this year in the following ways:

  1. Formulate a budget for holiday shopping this year. Set aside money for festive shopping in advance.
  2. Create homemade gifts for your friends and family this year.
  3. Do not buy expensive gifts. Buy what you can afford.
  4. Take advantage of online sales offers to get lucrative discounts.
  5. Look at your credit card statements and pay off your bills every month to avoid increasing your outstanding balance.
  6. Avoid making impulsive purchases as that would lead you to debt.
  7. Do not max out your credit cards. Stay within your credit limit.

                                     Read more on how to avoid holiday debt. 

It’s October. Start planning your holiday shopping by taking precautionary steps to save yourself from unnecessary financial stress.

Author Bio

Amy Nickson is a web enthusiast. She is associated with ovlg.com where she shares her expertise through her crisp and well-researched articles on a regular basis.

 

Attorney Gregory Oberhauser

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Gregory Oberhauser is the ONLY attorney in Massachusetts to be distinguished as an ACS-CHAL Forensic Lawyer-Scientist by the American Chemical Society!

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