Address Your Debt Issues Before the Holidays

Christmas Kitty says, "don't get tangled up in your debts."

It’s that time of year again. Thanksgiving is quickly approaching and then we’ll have parties for Christmas, Hanukkah, Kwanzaa and Festivus (or whatever you celebrate). There’s decorations and cookies and gift exchanges and toy drives and traveling to visit loved ones. Whew. December is a time when most of us lose our sanity, at least a little. NOW is the time to come up with a game plan for your finances.

I know, I’m a party pooper. The thing is, holidays can get really freaking expensive and it’s easy to get caught up in the madness. I say this as someone who has divorced-and-remarried parents, and who grew up juggling six family Christmas celebrations. Here’s what you can do now to make the next two months go by a little more smoothly:

1. Come up with a holiday budget (based on discretionary income, not your credit card limits) and stick to it. If your family usually has everyone buying presents for everyone, considering doing a name draw (“Max buys a gift for Chelsea, Tyler buys a gift for Dylan,” etc.) or a gift game like White Elephant. Holidays have never been more entertaining (and affordable) since some of my extended families switched to gift games instead of traditional present exchanges.

2. If you get hit with a lawsuit, DO NOT IGNORE IT. Sorry for shouting, but it’s THAT important. You have 20 days to answer a Summons and Complaint. If you don’t, the Plaintiff can file a motion for default judgment and can start garnishing your wages even before they get the judgment. Minnesota law is crazy like that. They can even freeze your bank account for up to 110% of the debt. That would be a really bad surprise when you’re in the middle of holiday shopping.

3. If you’re struggling with debt, get advice from a bankruptcy attorney or non-profit credit counselor before the holidays. For example, I would tell you not to use your credit cards during the holidays if you’re even considering bankruptcy, because it can be considered fraud. I would also tell you not to pay more than $600 to any of your creditors in the 90 days before bankruptcy (so no charging and then paying off $850 in Christmas gifts and decorations on your Target card to get the cardmember discount), and not to pay off debts to friends and family, because those are considered preference payments to creditors. I can also help you avoid “creative” financial planning mistakes like transferring assets out of your name.

4. If you can’t afford presents this year, don’t despair. Being broke does not make you a bad person, and the holidays have become too materialistic anyway. I say this as someone who, once or twice, needed to give coupon books (four hours of babysitting, two hours of house work, etc.) as Christmas gifts. It’s better to offer your services that someone can use throughout the year, than to rack up credit card debt trying to keep up appearances.

Take a few moments now to assess your financial situation. You’ll thank yourself later.

Photo (c) Anne Hansen Gathje. Model: One cute kitty.