Can You Spend Money When Filing For Bankruptcy?

Filing bankruptcy can help you gain a fresh financial start by eliminating or reducing existing debt. It can force you to give up some control financially, but the court will not heavily watch over your expenses. Instead, the court will only use its authority to review your bank statements and other financial records to verify that you qualify for bankruptcy and do not intend to hide money.

Day-to-day spending

Filing for bankruptcy is not meant to prevent spending but to help you settle your debt. Before filing, applicants must satisfy the means test, which evaluates their income and necessary expenses. The amount of your spending budget after filing will depend on whether you qualify for Chapter 13 or Chapter 7 bankruptcy.

Generally, the court will allow you to spend money on essentials such as food, housing, medical care, car payments, or work-related costs. You may still purchase other items under a miscellaneous expenses budget, but it is generally advisable to cut back and ensure you only spend money on your basic needs.

Luxury goods and services

The court will not discharge or release you from debt for any unnecessary or excessive purchases made 90 days before filing bankruptcy. The court may consider booking a vacation or purchasing a new car a luxury purchase when it is too extravagant compared to your financial situation.

If you have already filed for bankruptcy and are looking to take a vacation, you may be able to do so if it fits within your budget. Otherwise, holding off may be best until you receive your discharge. Chapter 7 petitioners typically receive a discharge four to six months after filing, while Chapter 13 petitioners receive it four years after filing.

Bankruptcy is often the result of poor budgeting and financial planning, but filing gives you a chance to have a clean slate. How you spend your cash after filing may affect the court’s decision to discharge or deny your debts. If you have concerns about your spending and budgeting when filing for bankruptcy, it is best to speak to an attorney.

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