AP Question

[buster123]

OK, now that I've been spinning my wheels and trying to think of anything, and everything, that could go wrong in out Chapter 7 filing, I have this concern...

My wife and I haven't used out credit cards much since late June of this year. We've used them here and there for things like food and gas when we just couldn't pay cash but no luxury purchases or cash advances (actually no cash advances ever).

Back in July, we were starting to feel the crunch of our monthly CC payments and were dipping into what little we had saved to make our payments. My wife was just told that here contract at work was ending and she would be out of a job in the fall. I however had a relocation offer from my job that would pay a nice bonus to move out to Seattle. We intended n using this bonus and what little equity we had left to clear much of our CC debt and get back on our feet.

In an attempt to make our savings last as long as possible, I called Chase which has my highest balance by far... $28K, asking if they had any programs available that would allow us to make reduced payments for the short term. I told them about my wife's job and said that was the reason we wanted to do this. Their answer was a resounding "no." Not because they didn't have such a program but because I didn't qualify... I gathered because I was making my payments. I told them that eventually this would become an issue and I was working with a credit counseling agency. I also told them that I did not want to file bankruptcy and needed their help to make this work. Still, "no" was their answer.

I decided to close the account so I couldn't use the card anymore, even if I needed it. I continued to make payments for the next couple months but in October my relocation was pulled away because my company got into a financial bind (figures huh?). We decided late n October that we would have to file because our savings were running dry and we wouldn't be able to keep up with our payments anymore... and the lump sum bonus from my job wasn't happening anymore.

So long story short... I was using the Chase card up until late June and haven't used it since. I would say the fact that I haven't used it since June is good but does it hurt me that I called Chase in July asking for help give them a case for an AP?

Again... this is likely my nerves making me think up these scenarios but I wanted to pose the question to the board to see what objective people think.

Thanks!

[HHM]

Nothing to worry about.

[tobee43]

In an attempt to make our savings last as long as possible, I called Chase which has my highest balance by far... $28K, asking if they had any programs available that would allow us to make reduced payments for the short term. I told them about my wife's job and said that was the reason we wanted to do this. Their answer was a resounding "no." Not because they didn't have such a program but because I didn't qualify... I gathered because I was making my payments. I told them that eventually this would become an issue and I was working with a credit counseling agency. I also told them that I did not want to file bankruptcy and needed their help to make this work. Still, "no" was their answer.

i just LOVE these banks ....you attempt to work with them and they say you have to be BEHIND...then you become BEHIND and they want you to catch UP before they will work with you!

we went thru the exact same situation...trying to work anything out is really a waste of time...and i agree with hhm...you'll have no problem.

[buster123]

OK, thanks!! I reviewed our purchases on the card from March - June and they were mostly living expenses but I did use it for some gift purchases for birthdays & communion for my son. If they wanted to get picky, they could probably claim that my June "luxury" purchases were over the $500.

Also, if a CC company does file an AP, do they usually do it for the entire balance (assuming it was incurred over at least a year) or just a portion?

[tobee43]

OK, thanks!! I reviewed our purchases on the card from March - June and they were mostly living expenses but I did use it for some gift purchases for birthdays & communion for my son. If they wanted to get picky, they could probably claim that my June "luxury" purchases were over the $500.

Also, if a CC company does file an AP, do they usually do it for the entire balance (assuming it was incurred over at least a year) or just a portion?

well...of course they go attempt to get the FULL balance...however, normally and many times..you settle the matter for i.e. .50 cents on the dollar, etc. that is...IF they file...many times you are best off to settle for a lesser amount than go all the way with the motion.

fraud is a difficult burden for the cc's to prove...so if you are past the 90 day period, i really think you should be fine.

[keptdigging]

I've got to disagree with the focus on the 90 day period. While this is the per se rule in the bankruptcy code, I don't think it's that important.

1. The CC company can make the case that you incurred the charges "fraudulently" well outside of that window. There's a sticky on this. The big issue is if you made the charges without intending to pay them back. Being merely outside of the 90 day window will not deter them from making this claim.

2. On the other hand, it'll cost the CC company thousands to litigate an AP. So $1000 charged a week before you file might not generate an AP.

The 90 day rule shifts the burden of proof--but it still takes an AP--which is a full blown lawsuit--to get the charges declared non-dischargeable. That's expensive for everyone.

Now time is your friend--but 90 days isn't really enough.

However, I'm guessing (you're not that specific on amounts) your total amounts charged may not be high enough to generate an AP. Unfortunately an amount not worth litigating over is worth is worth a threatening letter or two, so there might be some drama.

In my case I was focused on the 90 day rule until I found this site. In the end I delayed my bankruptcy. My issue was advances and balance transfers in the $5-$7500 range. Still got 10 days left of my 60 day club membership left, so I'm not sure how it will all come out. But so far, not a peep from a creditor.

In the end they look at their legal costs and risks vs. the value they might receive and decide accordingly. Except credit unions who seem to love to litigate in case where a CC company never would.

[keptdigging]

I should add that the fact that you made payments for a couple of months after closing the account really helps your case. My gut tells me you'll be fine. And the asking for help looks totally like a non-factor--you stopped charging and kept paying. Asking for help is not filing bk. But HHM answered that much more succinctly

[tobee43]

keptdigging

I've got to disagree with the focus on the 90 day period. While this is the per se rule in the bankruptcy code, I don't think it's that important.

1. The CC company can make the case that you incurred the charges "fraudulently" well outside of that window. There's a sticky on this. The big issue is if you made the charges without intending to pay them back. Being merely outside of the 90 day window will not deter them from making this claim.

2. On the other hand, it'll cost the CC company thousands to litigate an AP. So $1000 charged a week before you file might not generate an AP.

The 90 day rule shifts the burden of proof--but it still takes an AP--which is a full blown lawsuit--to get the charges declared non-dischargeable. That's expensive for everyone.

Now time is your friend--but 90 days isn't really enough.

kept, i think you made a valid point. i have also heard of some people that were advised to wait over the 90 days period.

we were actually given a definitive response by our atty" it's ONLY 90 days" for the trustee or the courts to consider fraud. ( with such authority as to be written in stone in our district).

but i agree with you, maybe must one also consider where the charges went and to whom and for what?

personally, we DID NOT follow our atty's advise and we put almost 2 years between "us" and "them"...i wanted absolutly nothing to be considered out of place. we also continued to pay many of our cards as well after they were closed, and up until the time we actually filed.

[tobee43]

and i must also add, the one ap we did have...was thrown right out the door.