Are you contemplating bankruptcy? Are your plans to start fresh in 2015 and finally get your financial struggles under control?
The end of the year is a great time to begin planning for positive financial changes, but your intention to file for bankruptcy can have a significant effect on your holiday season. Generous gift giving before filing can get you into a lot of trouble and how you behave during the holiday season can drastically affect your opportunities to improve your financial standing in the New Year. Likewise, receiving extravagant gifts from someone about to file can also create problems for you and the recipient.
What should you know about holiday gifting if you have bankruptcy plans in the New Year?
Giving away possessions, even if the intent is to brighten someone’s holiday season, prior to filing for bankruptcy can raise red flags in your bankruptcy case. In some instances, the recipient of the gift will be required to surrender that item when you file.
The same is true if someone you know files for bankruptcy within two years of giving you an extravagant gift. It might sound crazy, but there is a two year window in which the bankruptcy court can seize a valuable item in a bankruptcy filing, even if it no longer belongs to the filer!
These restrictions only apply to larger gifts – the kind that make it look as if you are trying to hide assets when you file, so do not feel as if you cannot give any gifts if you are contemplating bankruptcy. As with most things in life, moderation and common sense is key.
Statement of Financial Affairs
When you file for bankruptcy, you will be asked to fill out a form called a Statement of Financial Affairs. The form provides information about what types of gifts, given or received, that could raise suspicions. Specifically, it asks you to list all gifts (including charitable contributions) given to family members aggregating less than $200 in value per individual person and charitable contributions aggregating less than $100 per organization within the last year. You are also asked to list any property transferred to another person within the last two years.
In some cases, the court is given authority over assets you currently or previously owned and sold or gave away before you filed. The goal is to discourage the disposing of assets before filing and require the return of any transferred assets so their value can be determined and put toward paying creditors.
In general, you do not need to worry too much about gift giving during the holiday season, as long as the gifts you are giving are of reasonable value. However, if there’s a chance you might file bankruptcy in your future and you’ve contemplated a significant gift to a loved one, you should consult with a bankruptcy attorney to avoid complicating your case.