Year-End Bonuses, Holiday Spending, and Bankruptcy

 Posted on August 28, 2025 in Bankruptcy And Divorce

For many families in Texas, the holiday season brings mixed emotions. There is joy in gathering with loved ones, but also stress from gift-giving expenses, travel costs, and financial pressures that build as the year ends. For those already struggling with debt, a year-end bonus or a surge of holiday spending may complicate decisions about bankruptcy.

Although it is only the end of August, Christmas 2025 is coming up fast and these financial pressures may already be weighing heavily on your mind. But planning ahead is a good thing in this regard. If you are considering filing for bankruptcy in the next year, you will need to understand how factors like a bonus could affect the bankruptcy "means test" required by the U.S. Bankruptcy Code. This test determines whether your income is low enough to qualify for a complete discharge of unsecured debts under Chapter 7 or if you must file Chapter 13 and repay your debt over time.

With over 20 years of experience helping Texas families manage overwhelming debt, our firm has seen firsthand how holiday timing can make or break a bankruptcy case. Call our Kerrville, TX bankruptcy lawyer for a free consultation and start planning for a better financial future.

What Is the Bankruptcy Means Test?

The means test is a calculation used in bankruptcy cases to evaluate whether someone earns too much money to file Chapter 7 bankruptcy. It compares your average monthly income from the past six months to the median income for a household of your size in Texas.

• If your income is below the median, you usually qualify for Chapter 7.

• If your income is above the median, further work is required to see whether you have enough disposable income to repay debts in Chapter 13.

This calculation may seem straightforward, but the six-month "look-back" period is critical. Any sudden increase in income, such as a year-end bonus, can raise your average monthly income and affect your eligibility.

How Bonuses Can Affect Bankruptcy Eligibility

Many Texas workers receive bonuses in December or January. While these payments may feel like a blessing, they can cause problems if you are considering bankruptcy. Because the means test averages your income over the past six months, a large bonus can artificially inflate your earnings and make it appear that you have more money than you actually do.

For example, imagine a Kerrville resident who earns about $4,000 a month. If she receives a $10,000 holiday bonus, her six-month average income would jump, possibly putting her above the Texas median income. Without careful planning, that one-time bonus could push her out of Chapter 7 eligibility and into Chapter 13, where she would be required to make payments for three to five years.

Holiday Spending and Its Consequences on Bankruptcy

Another issue many families face is increased spending in December. Credit card balances often rise due to holiday shopping, travel, and celebrations. If you are already considering bankruptcy, this spending may raise legal questions.

Of course, beyond the numbers, it is important to recognize the emotional weight of holiday debt. Many Texas families feel pressure to maintain traditions or give generously, even when money is tight. When bills arrive in January, the reality sets in. Facing bankruptcy at this time of year can feel like failure, but it is not. Bankruptcy exists to give honest people a second chance. With over two decades of helping families, we know that relief and stability are possible, even after a difficult holiday season.

It is important to know, however, that under bankruptcy law, debts you borrow just before filing may be looked at more carefully. Creditors can object to discharging luxury purchases or cash advances made within 90 days before filing, arguing that you never intended to repay them. For example, if someone buys $5,000 worth of electronics as Christmas gifts and then files bankruptcy in January, that debt could be excluded from discharge unless it meets strict exceptions.

Should You Wait to File for Bankruptcy Until After the Holidays?

The timing of your filing is one of the most important decisions you and your lawyer will make. In some cases, waiting a few months until the bonus is outside of the six-month calculation period makes sense. In other cases, filing quickly to stop creditor actions is the priority.

Factors to consider include:

• Size of the bonus: A small bonus may not affect your means test outcome, while a large one might.

• Urgency of creditor action: If foreclosure, repossession, or garnishment is imminent, delaying may not be possible.

• Type of bankruptcy: Even if you do not qualify for Chapter 7 due to a bonus, Chapter 13 may still provide needed protection.

Every case is different, and this is where the advice of an experienced bankruptcy attorney is essential.

Protecting Yourself Before Filing for Bankruptcy 

If you are thinking about filing for bankruptcy, there are steps you can take to protect yourself as you begin planning ahead. Even if you are sure you will file for bankruptcy and pass the means test, avoid running up credit cards on luxury items if you expect to file soon. When you do spend, keep receipts and records to show that recent expenses were for necessities, not luxuries. If you need to make a large purchase or take a cash advance, consult a bankruptcy lawyer first.

Last but not least, be honest about bonuses, overtime, or other extra income when discussing your options with your lawyer. Bankruptcy law is a balance of strict rules and human circumstances. A highly experienced attorney can analyze the timing of your income and expenses, help you choose between Chapter 7 and Chapter 13, and make sure your filing avoids costly mistakes. With over 20 years of guiding Texas families through financial challenges, we take pride in offering clarity, compassion, and a path forward when debt feels overwhelming.

Contact a Kerrville, TX Bankruptcy Lawyer

If you are worried about how a year-end bonus or holiday spending might affect your bankruptcy case, now is the time to seek advice. Our Schertz, TX bankruptcy attorney at the Law Offices of Chance M. McGhee can explain your options and help you decide on the best timing for filing. Call 210-342-3400 today to schedule your free consultation.