Bankruptcy Questions Answered: If I’m Planning to File for Bankruptcy, Can I Still Take a (Pre-Paid) Vacation?

Bankruptcy and Vacation––It’s Down to Your Timeline

On its face, going on a vacation and then turning around to file for bankruptcy doesn’t make sense. In general, vacation can be deemed a luxury, and luxuries aren’t compatible with the somewhat austere methods involved with bankruptcy. But the key detail in this example is that the scheduled vacation is pre-paid.

If it was paid within 90 days using a credit card, when an individual is already in financial straits, the purchase could be flagged as being fraudulent. This is because it’s assumed that the charge was made without the intent of repayment, but instead relying on the bankruptcy to discharge the debt. In a case such as this the creditor or bank would have the right to seek an Order of the Bankruptcy Court to make the debt incurred by the vacation non-dischargeable. It could then remain a sum owed to creditors to be repaid via the bankruptcy proceedings. In the rare case that the vacation or airline tickets could be transferred to a third party or reimbursed, the trustee could seek that avenue in order to liquidate the trip, selling it to regain assets to pay towards total debt.

On the other hand, if the trip was bought and paid for far in advance, during a time when the individual was experiencing financial stability and was able to keep current with creditors, there is no reason to fear that the vacation could be held against the claimant. So long as it can be clearly proven when the purchase was made and that the claimant’s financial situation at the time of purchase was sound, then the vacation plans can stand.

Vacation and Chapter 7 Bankruptcy vs Chapter 13 Bankruptcy

If you’re filing a chapter 7 bankruptcy and also planning to go on a pre-paid vacation, it’s best to use a debit card or cash to pay for any expenses incurred while you’re away. If they are charged to a credit card, that sum will be questioned during a bankruptcy court case and it will likely not be dischargeable. And though it is perfectly legal to take a vacation that was bought and paid for in advance, it could require some explanation, as creditors could easily perceive a vacation as an unmerited luxury, no matter the circumstance. This is where good communication is invaluable to avoid issues with your filing––you must lay out all relevant details to your trustee, and never miss your 341 meeting or any other important deadlines due to a pre-planned vacation.

In a chapter 13 bankruptcy case, the court will mandate a payment plan to enable you to repay your debts. Because debts are not simply discharged, the likelihood of potential issues arising is lower. As long as you’re making your scheduled, monthly payments to the trustee, you can take a pre-paid or a newly planned trip and spend extra money on that trip, so long as you meet three criteria:

Never miss meetings or deadlines
Costs incurred must be affordable and paid with disposable income
Do not take on new, significant debt

Yes, this is sort of a catch-22 situation, because while there is no outright limit on traveling, your repayment plan has been carefully calculated to ensure that besides basic necessities of life, your income is funneled toward repayment. It’s unlikely that you will have enough disposable income available to go on a newly planned trip or a spending spree while on a pre-paid vacation. And since you are barred from taking on new debt during the repayment period without trustee approval, planning a new vacation or spending heavily while on your pre-paid vacation is just not a plausible reality.

Other things to keep in mind surrounding traveling could include acquiring a passport. If part of your repayment includes more than $2,500 in back child support or $50,000 in back taxes, your application could be denied. However, situations vary. If the purpose for traveling internationally is to visit a terminally ill relative or to attend a funeral, there could be a way forward. An experienced bankruptcy attorney can field these sorts of questions and help you plan accordingly.

Partner With an Expert Ohio Bankruptcy Lawyer

Navigating the waters of a bankruptcy can feel daunting, at best, impossible, at worst. And without knowing all the ins and outs and best practices, you could be left feeling vulnerable and unsure. Don’t worry–you have an advocate in us. If you need advice on how to proceed with your bankruptcy case and would like to consult with a seasoned chapter 7 bankruptcy lawyer about your specific situation, get in touch with us at Hausen Law, LLC. Draw on the expertise and skills of James F. Hausen. He has handled over 2,000 cases and serves the Akron and Canton areas. Contact Northeast Ohio Bankruptcy Attorneys to set up a free consultation and learn more about your bankruptcy options.