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Are you in debt after the holidays?

By Barbara Nevin

A case, from the Ghosts of Christmas Holidays Past, may be helpful!

It was Christmas in 1993. Bill Clinton was president, and Beanie Babies were introduced to the public. During that year Sears Roebuck and Company decided to be "Scrooge Like" and took "exception" to the discharge of collector Barbie Dolls a mother paid for on her Sears's credit card. She also purchased Barbie and Ken clothes, Barbie's case, and Barbie's armoire. This unfortunate purchase happened next door to us, in the State of Wisconsin, in the case of Sears, Roebuck and Company, v. Bruce A. Johannsen and Terri L. Johannsen, Bankruptcy case number, 92-13915-7, Adv. Case No. A93-1039-7. The total of all of their toy purchases by the Johanssens amounted to $1110.71.

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This case is important for bankruptcy counsel and their clients during this time of year as many of you are suffering from facing mounting credit card debt from Christmas purchases on your credit cards, as well as higher heating bills and expenses from holiday entertaining. Many of you may be considering bankruptcy as an option when you have problems making ends meet. What are the concerns for filing for bankruptcy after Christmas?

Obtaining a fresh start financially after the holidays is a great way to start the year. However, there are some icy bridges to cross before the court will consider whether you can obtain discharge of your indebtedness. One roadblock is that the bankruptcy law provides that consumer debts of $650.00 for luxury goods and purchases owed to a single creditor are presumed to be non-dischargeable, meaning that the debt will not go away. The Barbie purchases of the Johannsens could be presumed to be luxury goods. The debt has to be $650.00 to a single creditor. If you ran up bills of $3000.00 for example, but none of the bills were over $650.00 to one creditor, there is a greater chance of discharge.

Also, the goods must not be "luxury goods." There is no precise definition of luxury goods. Goods that are necessities to support the debtor are typically not luxury goods, such as a new furnace or clothing for your children. Judges decide this typically this on a case by case basis.

The second road block to cross is that there should not be cash advances of $925.00 or more during the 70 days prior to filing bankruptcy. This action is also presumed to non-dischargeable as well.

It is important to know that the creditor, during the life of your bankruptcy, must bring a separate action to stop the discharge of these debts. If the creditor does bring such an action, you have the right to challenge the action and present evidence to a judge why you feel the debt should be discharged. For example if you withdrew $1000.00 in cash to pay your mortgage or rent payment, the evidence of this debt may prove the debt is dischargeable, when reviewed by a bankruptcy judge. Rent is considered as a necessity in life for the debtor.

In both of these situations, a skilled attorney can help you navigate through the court system. Our attorneys at Milavetz, Gallop and Milavetz P.A. are experts in the area of bankruptcy and will know what to do to advise and help you!

You may be asking what happened to the lady who purchased $1100.00 in Barbie dolls and accessories for her daughter? Was the debt discharged? Strangely enough, the judge declared that the debt was dischargeable. In order for the debt to not be dischargeable the debtor must have had a mind set when she bought the Barbie toys that she was not going to pay back the debt. Here, the testimony revealed the debtor was going through a divorce and did not have the mind set to file bankruptcy. Because her husband was filing, she was later added to the petition. I am sure this is not the result Sears would have predicted, as luxury Barbie dolls would not be presumed to be a necessity. However, good lawyering was able to obtain a discharge for Mrs. Johannsen!

If you are suffering the post-holiday blues, from growing debt, please call us. We can help!

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