Avoid Credit Cards this Holiday Season

Christmas comes later next month and, for some, the ritual of running up a large credit card tab and spending the next year paying it off feels necessary. In this economy, however, and in the wake of changes to the Bankruptcy Abuse Prevention and Consumer Protection Act, we suggest re-thinking this strategy.

According to the new rules, debts to a single creditor totaling more than $550 for luxury goods or services can't be discharged in a bankruptcy. Should you find yourself in a tough spot after the holiday season -- so tough that you're forced to declare bankruptcy -- you might not be able to discharge credit card debt you've rung up for Christmas purchases. If you've accumulated thousands of dollars in Christmas credit card debt, you'll be paying it back no matter what.

Instead of relying on your credit cards this holiday season, instead try to save up enough money to do your Christmas shopping, or look into making your own gifts. The potential trouble over-spending could cause you down the line is not worth it.

Smart Christmas Spending

The holiday season is one that brings joy to the hearts of many. It's a chance to see and spend time with loved ones, eat cookies, drink hot cocoa and exchange gifts.

For some, however, this same season can be an extremely stressful period of time.

The pressure to purchase gifts for everyone can take its toll, and in some cases, can cause people to spend more money than they can possibly afford. They ring up astronomical credit card bills and spend themselves completely dry. Christmas shopping can become the catalyst that sparks an eventual bankruptcy, if you aren't careful.

Here are a few tips on how you can avoid holiday over-spending and eventual financial issues.

1. Establish your holiday shopping savings early and contribute to it throughout the year.
2. Buy gifts during the year, even when you're nowhere near Christmas.
3. Set a limit for your Christmas shopping.
4. Don't bring your credit cards. This forces you to shop only with the cash you've saved.

How to Take a Positive Approach into Bankruptcy

Bankruptcy can be seen as a low point in the life of the filer, but it shouldn’t be. One should think of the low point as being the event that has forced one into filing for bankruptcy, like illness or the loss of a job. If you’re filing for bankruptcy protection, you should see it as a fresh start, since this is the reason bankruptcy was first created.

The bankruptcy process gives the debtor the chance to clear away many overwhelming debts, freeing up income for secured debts like a mortgage. When discharged from bankruptcy, the petitioner will find less hassle from creditors.

If someone has filed because of an illness, divorce or unemployment, the last thing he or she needs is stress from collection agencies. To most of these folks, however, the filer is just a name, number and collection amount. However, debt collectors work everyday with people in default, so they become hardened.

If you switch your mindset from looking at a bankruptcy filing as a low or looking at yourself as a failure to seeing the process as a fresh start, you can let the filing take away a lot of stress. Let your bankruptcy lawyer help you remove the negative images you might associate with it. If you’re filing for bankruptcy, don’t think of it as a negative. Think about the fresh start it will provide and new hope you will have.