Could this holiday season push you into bankruptcy?

Could this holiday season push you into bankruptcy?

On Behalf of | Dec 1, 2020 | Consumer bankruptcy

The holidays are a time of gift-giving and get-togethers. You may want to give extravagant gifts to loved ones whom you only get to see once a year to remind them of how important they are to you.

No matter how noble and generous your intentions are when giving gifts during the holiday season, it’s important to remember that the debt you take on may last much longer than the excitement of receiving the perfect gift. In some cases, the holidays can lead people to financial struggles that last all year.

Many American households overdo it on the holidays

Some people put a little bit of money aside every week so that they have plenty of cash to spend for the holidays. Others don’t save and instead finance their holidays by making a bunch of credit card purchases.

Buying gifts, funding travel and even fixing up your house for a party on credit are all common practices. The average American household incurs $1,325 in new debt during the holiday season. If they only make the minimum payment on those balances, people might still find themselves paying off last Christmas when it comes time to start shopping for next Christmas.

For some people, an additional $1,000 in credit card debt might be enough to push their budget into total chaos.

Holiday spending can start a snowball of uncontrollable debt

People usually hope to pay off their holiday credit card bills early in January, but they fail to consider that they will have plenty of bills coming due all at once. If they didn’t have the money to budget savings for the holidays, they likely won’t have an extra $100 to throw at their credit card bill every month.

Especially for those near the limit as far as their balance goes, holiday spending might mean incurring fees every month for being over the limit on their card. Additionally, they will likely have to pay interest rates that are 20% or higher on their purchases, undoing whatever savings they may have achieved through holiday sales.

If you already know that your current debt levels aren’t sustainable, it may be time to consider whether bankruptcy could help you regain control over your finances by discharging your unsecured debts.