Adversary Proceeding, Section 523, Questions

[Bankruptcy20]

You are starting to sound like swampwiz!

Sorry, I am actually not sure what a swampwiz is! But, I had five questions which was in the first post. In essence, I was looking to connect with other people who faced what I am facing to share anecdotes and learn from each other.

The morality of gambling, whether to make any payment or not, etc, commentary were just responses to those who replied (which I, of course, appreciate, as all communication is good).

By the way, to be clear, I am faced with only threatening letters, the actual APs have not been filed. I have read of several AP THREATS but I do not recall anyone actually having one FILED.

[backtoschool]

Sorry, I am actually not sure what a swampwiz is! But, I had five questions which was in the first post. In essence, I was looking to connect with other people who faced what I am facing to share anecdotes and learn from each other.

The morality of gambling, whether to make any payment or not, etc, commentary were just responses to those who replied (which I, of course, appreciate, as all communication is good).

By the way, to be clear, I am faced with only threatening letters, the actual APs have not been filed. I have read of several AP THREATS but I do not recall anyone actually having one FILED.

Here are some cases where AP's were filed:

http://www.bkforum.com/showthread.php?t=39250&highlight=adversarial+procedure

http://www.bkforum.com/showthread.php?t=45864&highlight=adversary+proceeding

http://www.bkforum.com/showthread.php?t=44495&highlight=adversary+proceeding

http://www.bkforum.com/showthread.php?t=22066&highlight=adversary+proceeding

These should get you started. As HHM and justbroke state above, it's not about the gambling as much as it is about the timing of filing in relation to the advance you took. To summarize points made above, here is why that threat letter may be leading to an actual AP:

1. Gambling is a luxury not a necessity and therefore you did not have to use the card when you knew you were insolvent.

2. You never made a payment on the advance, therefore there was no intent to pay, according to your creditor.

3. You took the advance relatively soon before filing for bankruptcy, therefore you knew that you were insolvent when you took the advance.

I don't see that you have provided convincing defenses yet to any of these three points that the creditor will make against you in an AP.

[Bankruptcy20]

Here are some cases where AP's were filed:

http://www.bkforum.com/showthread.php?t=39250&highlight=adversarial+procedure

http://www.bkforum.com/showthread.php?t=45864&highlight=adversary+proceeding

http://www.bkforum.com/showthread.php?t=44495&highlight=adversary+proceeding

http://www.bkforum.com/showthread.php?t=22066&highlight=adversary+proceeding

These should get you started. As HHM and justbroke state above, it's not about the gambling as much as it is about the timing of filing in relation to the advance you took. To summarize points made above, here is why that threat letter may be leading to an actual AP:

1. Gambling is a luxury not a necessity and therefore you did not have to use the card when you knew you were insolvent.

2. You never made a payment on the advance, therefore there was no intent to pay, according to your creditor.

3. You took the advance relatively soon before filing for bankruptcy, therefore you knew that you were insolvent when you took the advance.

I don't see that you have provided convincing defenses yet to any of these three points that the creditor will make against you in an AP.

Thanks very much for the links, I'll take a read. But, just out of curiosity, why do you think I was insolvent at the time of the transfers (as you stated in #1 and #3)?

I do not think I was.

[backtoschool]

Thanks very much for the links, I'll take a read. But, just out of curiosity, why do you think I was insolvent at the time of the transfers (as you stated in #1 and #3)?

I do not think I was.

In answer to your question Bankruptcy20, I think you were insolvent when you took the advances for the following reasons:

1. Your income was much lower than your normal income five months before you filed for bankruptcy or you would not have passed the means test. Here is where you state that your income was vastly lower:

"I used to have high income, but due to several compounding factors, I have had no income and passed the means test (I'm currently a No Asset, without Presumption of Abuse, as I head into my 341 meeting soon)."

In order to pass the means test you needed to have a vastly diminished income from your former income in the last six months. You took your last advance 5 months ago, after you lost your income. This means you took your last advance when you were insolvent.

2. You took a cash advance to pay for gambling, instead of using cash or getting a loan with collateral to pay for that gambling. If you were solvent at the time, you would have been able to pay at least the minimum payment on the loan within the agreed terms of the loan by using some of your resources (ie cash or collateral) to make a minimum payment on the loan. Not making a minimum payment on the loan is a double edged sword in that it both shows your insolvency and it also points to an intent not to pay the loan back.

I am not judging the cash advance at all. I am simply playing devil's advocate here and trying to show you the types of arguments you are likely to see from your creditor in an AP.

[Bankruptcy20]

Sorry for the multiple responses, BacktoSchool. I read the links now, and actually, I had read those links before.

Understanding that all cases are different, in the first link, the person settled with Chase. I'll comment on this one as it's not clear why they settled, as they seemed to not to have necessarily a weak case (at least prima facie). By the fact Chase settled for such a low 17% percentage of their claim, I guess they also agreed the creditor had a weak hand. If their case hinged on the full usage of the line, in my case, I used less than 10% of my line. And once I realized I was in financial trouble (AFTER that disastrous series of gambling sessions, which was after the transfers), I refused all subsequent transfers (ironically, one was for the full remaining 90% of that same card, which I could have taken but chose not to... I would just love to show a judge this same credit card company's offer for a balance transfer for 9x the amount I had taken previously which I then ignored once I knew my financial situation was deteriorating).

The second and third link involve someone who lied on their credit applicaton, which I did not do. The fourth link involves gift cards purchased within the 90 days, which is difficult, to say the least.

I actually found this link and case to be much closer to my case:

http://www.bkforum.com/showthread.php?t=45153

His case is different but the letter reads almost exactly the same.

Anyways, sorry to repeat, but I would very much love to hear from anyone who actually fought an AP post a claim. As rare as it is, (given AP threats are rare, and it seems most settle), I think we can all learn from it.

Here is a link to the case I referred to above, it's in Colorado but I found the commentary from the BK judge interesting to say the least:

http://www.cob.uscourts.gov/opinions/06-01174and06-01347_Am_Memorandum_Opinion.pdf

These are two separate cases by Discover and MBNA, and both entered into settlement agreements which were not upheld by the judge. The reasoning is interesting to read thru.

Thanks all for the posts!

[Bankruptcy20]

In answer to your question Bankruptcy20, I think you were insolvent when you took the advances for the following reasons:

1. Your income was much lower than your normal income five months before you filed for bankruptcy or you would not have passed the means test. Here is where you state that your income was vastly lower:

"I used to have high income, but due to several compounding factors, I have had no income and passed the means test (I'm currently a No Asset, without Presumption of Abuse, as I head into my 341 meeting soon)."

In order to pass the means test you needed to have a vastly diminished income from your former income in the last six months. You took your last advance 5 months ago, after you lost your income. This means you took your last advance when you were insolvent.

2. You took a cash advance to pay for gambling, instead of using cash or getting a loan with collateral to pay for that gambling. If you were solvent at the time, you would have been able to pay at least the minimum payment on the loan within the agreed terms of the loan by using some of your resources (ie cash or collateral) to make a minimum payment on the loan. Not making a minimum payment on the loan is a double edged sword in that it both shows your insolvency and it also points to an intent not to pay the loan back.

I am not judging the cash advance at all. I am simply playing devil's advocate here and trying to show you the types of arguments you are likely to see from your creditor in an AP.

Very good points.

On #1, I would have failed the means test at the time of the balance transfer as my income was too great. Insolvency, as you know, has many different meanings as it is used differently by IRS, BK, and other standards. If you mean to use the 6 month means test as a barometer of "insolvency", then yes, I fail now that test NOW, I am insolvent NOW, but I passed the means test at the time of the balance transfer. The prospect for future income was also much much higher (for other reasons) at the time of the transfer. Then there are other factors (such as my last three years income, and other facts and circumstances, etc, etc)

On #2, after the balance transfer and after the gambling, I had sufficient cash to not only pay a minimum balance but probably to pay off the entire 0% promotional balance transfer if I was instructed to, but my lawyer (who I met and hired after that session) specifically told me not to. My monthly living expenses are quite large, and I was instructed instead to pay those off. I am comfortable and can defend every dollar spent as I understand I could be under a microscope. There is no concern for preferential payments, as all creditor payments were frozen per my lawyers' instructions, instead cash was used to pay for day to day living expenses. The issue is one of INTENT at the time of the transfer.

I do appreciate the devil's advocate points, by the way. This is a great forum

[backtoschool]

Very good points.

On #1, I would have failed the means test at the time of the balance transfer as my income was too great. Insolvency, as you know, has many different meanings as it is used differently by IRS, BK, and other standards. If you mean to use the 6 month means test as a barometer of "insolvency", then yes, I fail now that test NOW, I am insolvent NOW, but I passed the means test at the time of the balance transfer. The prospect for future income was also much much higher (for other reasons) at the time of the transfer. Then there are other factors (such as my last three years income, and other facts and circumstances, etc, etc)

On #2, after the balance transfer and after the gambling, I had sufficient cash to not only pay a minimum balance but probably to pay off the entire 0% promotional balance transfer if I was instructed to, but my lawyer (who I met and hired after that session) specifically told me not to. My monthly living expenses are quite large, and I was instructed instead to pay those off. I am comfortable and can defend every dollar spent as I understand I could be under a microscope. There is no concern for preferential payments, as all creditor payments were frozen per my lawyers' instructions, instead cash was used to pay for day to day living expenses. The issue is one of INTENT at the time of the transfer.

I do appreciate the devil's advocate points, by the way. This is a great forum

You can find an infinite amount of dissimilarities and similarities between any two cases. All cases are different.

The difference between gift cards and cash advances for gambling and between 90 days and 150 days might seem huge to you, but may not seem that large to the bankruptcy judge. I see more similarities than differences in the cases.

And as to the lying on the application, I was using that case to show that an AP came up when a large cash advance was taken and no payments were made on it. If you go to AP, be prepared for a proctology exam of your income going back as long as you had the cards....

I understand that you want to feel you are safe from an AP, but in my opinion, you are not safe from an AP. In my opinion (which granted is just a laywoman's opinion and may have no weight with you....) you would not win if you went to AP. Cash advances for gambling are by definition luxuries and not paying anything back on them opens you up to questions of intent.

Just my opinion.....

[Bankruptcy20]

You can find an infinite amount of dissimilarities and similarities between any two cases. All cases are different.

The difference between gift cards and cash advances for gambling and between 90 days and 150 days might seem huge to you, but may not seem that large to the bankruptcy judge. I see more similarities than differences in the cases.

And as to the lying on the application, I was using that case to show that an AP came up when a large cash advance was taken and no payments were made on it. If you go to AP, be prepared for a proctology exam of your income going back as long as you had the cards....

I understand that you want to feel you are safe from an AP, but in my opinion, you are not safe from an AP. In my opinion (which granted is just a laywoman's opinion and may have no weight with you....) you would not win if you went to AP. Cash advances for gambling are by definition luxuries and not paying anything back on them opens you up to questions of intent.

Just my opinion.....

Thanks, I actually agree the most with your last sentence, as I do understand I will face questions for which I am prepared to answer.

The purpose of this thread is to not to try to feel safe, or whatnot, that's what my lawyer is for. I was seeking fellow filers' experiences if they battled APs to learn from each other , beyond my initial five questions. And, I still stand behind what I wrote before, it is clear to me that there is an overabundance of simple: "you cannot afford the legal fees, so settle any APs!" on these forums and a sense of presumption of guilt.

As you say, there are many similarities and dissimilarities, but note that the gift card and gambling case studies are quite different in two important aspects: the over and under 90 day presumption of guilt (there is a legal difference between 90 and 91 days, so to say, as you know, as to who has the burden of proof) and second that person needs to explain where the cash went (more a trustee issue than a disgruntled creditor) where mine is a simple receipt for a wire transfer.

You seem to write often I see on these forums, sometimes with the notion that if you never made a payment, there's a presumption of bad intentions, etc, etc. It may be worthwhile for you to scan the case I linked above. It could be an interesting read to hear how one actual BK judge thought thru these issues (particularly the legal fee issue).

Anyways, I hope our back and forth does not come across as flaming or what not; I actually appreciate the dialogue.

For what it's worth, it may be better to stay away from discussing my case, as I am pretty comfortable with where I stand, and there's always so many person-specific issues that it is not a good use of time. But, I would still welcome any people who actually got served an AP threatening letter or defended an actual AP claim to either PM me or write here.

Thanks all!

[backtoschool]

For what it's worth, it may be better to stay away from discussing my case, as I am pretty comfortable with where I stand, and there's always so many person-specific issues that it is not a good use of time. But, I would still welcome any people who actually got served an AP threatening letter or defended an actual AP claim to either PM me or write here.

Thanks all!

I will be more than happy to "stay away from discussing your case".

Good Luck.

[shabam]

Anyone can go to pacer and read up on a number of cases involving similar circumstances. I have and it's the reason for $150 pacer bill.

What do you think the term insolvent means in terms of a bankruptcy? it means did your assets exceed your debts. Not to mention, would the transaction make you insolvent. Income is irrelevant in this test.

Bankruptcy judges are not interested in opinions or excuses, they have heard all of them. Furthermore, just because the lawyer told you to stop paying does not mean it was the best decisions. Did you seek advice from a number of lawyers or just rely on this one?

For lawyers to respond this quickly, you are looking at trouble.

[shabam]

To summarize points made above, here is why that threat letter may be leading to an actual AP:

1. Gambling is a luxury not a necessity and therefore you did not have to use the card when you knew you were insolvent.

2. You never made a payment on the advance, therefore there was no intent to pay, according to your creditor.

3. You took the advance relatively soon before filing for bankruptcy, therefore you knew that you were insolvent when you took the advance.

I don't see that you have provided convincing defenses yet to any of these three points that the creditor will make against you in an AP.

He clearly does not realize that opinions mean nothing to a judge. The balance transfer was basically a cash advance. It was not a transfer of debt from one creditor to another.

No payment can easily be used as intent to defraud. Previous payments are irrelevant and hearsay. The fact is no payments were made period.

The third point is also a hole in one for the creditor. How does someone become bankrupt in 5 months without unforeseen circumstances. The health care he mentioned earlier is exactly what a bk covers as it was unforeseen, gambling losses are not. Not to mention "but it is a small percentage of the total debt I am seeking to discharge" and "Things got worse", illustrating they were insolvent at the time of the transactions.

[shabam]

If you have a "prominent" law firm, I highly doubt they are going to pursue an AP as part of the initial cost.

I hope have you have a good $3K ready.

[Bankruptcy20]

Anyone can go to pacer and read up on a number of cases involving similar circumstances. I have and it's the reason for $150 pacer bill.

What do you think the term insolvent means in terms of a bankruptcy? it means did your assets exceed your debts. Not to mention, would the transaction make you insolvent. Income is irrelevant in this test.

Bankruptcy judges are not interested in opinions or excuses, they have heard all of them. Furthermore, just because the lawyer told you to stop paying does not mean it was the best decisions. Did you seek advice from a number of lawyers or just rely on this one?

For lawyers to respond this quickly, you are looking at trouble.

Not sure what you are trying to achieve, but here are your answers:

1. Yes, I did look for some cases. I posted the link to one above. But I was seeking fellow people who actually had these same experiences, which I am trading PMs with someone and it has been very helpful

2. Actually, you are incorrect at your definition of insolvency. But, my comments regarding the means test was to correct the other posters' assumption to use the means test as an insolvency test at the time of the promotional transfer if you scroll back

3. And yes, I spoke to several BK lawyers, and they all told me the same thing. 2-3 payments would be "helpful" but not critical given my situation. The notion of just one payment was a bit too cute, and not even worth it. And yes, promotional balance transfers are interpreted differently than cash advances in some districts. And no, I was not insolvent at that time by the judgment by a lawyer at that time. I am insolvent now.

4. In terms of speed, and your interpretation of that, it is interesting that this same law firm has also sent other similar letters on the same time period to other people. They seem to make a business in catering to credit card companies and using this quickly shot off letter to scare people. Seems not too dissimilar to debt collectors and their tactics. Either they must be on a national retainer or just troll the BK filings to scrounge up business.

A word to the wise, way too much fear mongering on these forums.

[shabam]

The means test is different to an AP insolvency test. Insolvency is Assets vs Debt.

If you are going to battle this, best of luck to you.

[biotechsolution]

the reason no has fought an AP is because the only people who win in the action is the attorneys' representing them.
A good attorney will charge you between 3-5K to do it.

If he's not then he's not doing the research to respond to the complaint.