What do Bankruptcy Courts Consider a Luxury Purchase?

 Posted on December 24, 2024 in Bankruptcy

Before you file for bankruptcy, it is important to avoid making any luxury purchases on credit for at least several months. If you use your credit cards to purchase luxury goods or services soon before filing, it might look as though you are deliberately trying to max out your credit cards knowing that your debt is about to be cleared. You may also not be able to discharge debt you acquired by making luxury purchases shortly before filing. Understanding what is and is not considered a luxury purchase is essential during the bankruptcy planning process. An experienced San Antonio, TX bankruptcy lawyer can help you determine if an expenditure you are considering making would be considered a luxury purchase.

Luxuries Are Goods and Services That Are Not Reasonably Necessary 

When most people think of luxury purchases, they think of things like high-end spa treatments and designer handbags. While these things would certainly be considered luxury expenditures, the way luxuries are defined in bankruptcy law is much less restrictive. Luxury purchases are any purchases that are not reasonably necessary for your and your family’s support and maintenance. This can include recreational expenses like going to concerts or taking a vacation, buying high-end goods when a less costly item would have sufficed, and buying items that are not essential to daily living.

This definition is not always clear-cut. For example, your family may genuinely need a new couch if yours is damaged from many years of use. A couch would likely be considered an essential good, but the type of couch you buy matters. If you go out and purchase a $5,000 sofa from a high-end retailer, you may not be able to argue that it was necessary. However, if you spend $200 on a gently used couch, you are very unlikely to encounter any pushback.

Going on vacation would nearly always be considered a luxury. However, in some cases, reasonable travel-related expenses are not considered luxury goods. For example, if you must travel to attend an in-person job interview or to seek medical care at a specialty hospital in another state, and you take reasonable steps to keep the trip as inexpensive as possible, your travel might not be considered a luxury.

Contact a San Antonio, TX Bankruptcy Attorney

Law Offices of Chance M. McGhee is skilled in helping people who are planning to file for bankruptcy avoid costly mistakes. Experienced Bexar County, TX bankruptcy lawyer Chance McGhee can advise you regarding which purchases might be considered luxuries. Contact us at 210-342-3400 for a complimentary consultation.