presumption of fraud

[rymetymeuk]

Hey all,
I have a lot of unsecured credit card and loan debt, I had a fairly big gambling problem and also lost a lot of borrowed money in the stock market.

I have my house listed for sale and if it sells in the next 4 weeks or so then I'll repay a lot of the debt then move and pay the rest off over time.

My question is..I know the 60/70 day rules for cash advances and also luxury purchases, and I'll be over that but also if I do ch 13 it'll likely be a full pay. my lawyer said he had never seen a challenge to a full pay.

I am continuing to use my credit to pay for the home work we needed to do to sell the house, so with it being listed for sale does this show the lenders that I indeed do intend to pay the debt back?

I'm in a limbo situation right now, I either sell the house which will enable me to repay a great deal of the debt, or I stop paying everything unsecured and file ch 13. I can't stop paying unsecured until I know the house won't sell, so it's a bit of a catch 22. I know that I shouldn't be using credit, but the point is I can't afford not to and still make all my payments (with a deficit monthly).

I am current on all debt payments and have paid two min payments on any cards I got cash advances on.

Just looking for some clarification if this doesn't sell and I have to do ch 13.

Many thanks

[justbroke]

It's a presumption of non-dischargeability more than a "presumption of fraud". If you are in a 100% plan, it's really irrelevant since the debt would be paid 100%.

As for your strategy of not trying to anger any creditors prior to filing, it's tough to say what the right thing to do will be. It appears that your primary strategy is to sell the house, payoff the majority of unsecured debt, and then deal with the rest afterwards. I don't know if that means filing Chapter 13 after the majority of debt is paid or that you intend to make "minimum" payments for the next 30-40 years.

It's a tough decision as to whether to file now or wait until after the home is liquidated and the proceeds disbursed. I don't know if the latter is easier within the Chapter 13 process where there would be more control, or if doing it outside may tickle your inner-gambler with that much (cash) money available to you.

You will literally need to setup two scenarios and you'll probably need a spreadsheet. Look at the costs over time as well as the probability of success. Neither can be overlooked.

I'm sure someone will come along and say don't pay any of your unsecured debt anymore, wait for the closing on the home, use that money to settle with the creditors, and take whatever hits caused by that strategy. The only problem with that strategy is that you don't know if creditors will settle; especially if you've been paying and you're not behind.

So many options.

Where you want to be at the end of this process, along with the length of time to reach that end goal, should help drive your decision.

[rymetymeuk]

thanks for the reply justbroke. very good points which I should clarify. (btw, no gambling will occur with any of this monies, that is well and truly behind me now)

the two options are:
1). sell the house, use the equity received to pay off around 125k of the 230k. then move into a cheap small place, and make a plan to repay the remainder in approx 12-18 months (household income is approx 165k).

2). file ch 13 now, stop paying everything unsecured and then do my payment plan etc. again, I should be a 100% pay over 5 yrs.

the options in my mind kinda balance out. 1- i protect credit, fast pay it down and then save for a new home...2- I protect the current equity, can then save in 401k, hsa etc and get to grips with my payments etc.

i just wanted to know if the trustee will freak if they see that I have used credit before filing, but my argument there would be that I did indeed fully intend on paying it back through home sale..

thanks again!

[justbroke]

The Trustee technically doesn't freak out... it's the creditors that freak out. I can see a Chapter 7 Trustee being concerned if they see thousands of dollars spent just before filing. In fact, my Chapter 13 Trustee didn't even care about my credit cards and never requested a single statement. In a Chapter 13, you are trying to pay back your creditors so it is a much different Trustee than that in a Chapter 7.

Your option #1 would preserve credit but best intentions don't always work out the way that we want them to. My income is a little more than yours, but I could never conceive of paying $100K in debt in 12-18 months. It was always my plan to payoff a $300K house in 3 years... never happened. What happened? Life.

I just don't want you to make an emotional decision about your credit. I want you to make a financial decision about where you want to be (almost guaranteed) within 5 years. So rather than try to payoff that debt in 12-18 months, let's double it to 24-36 months. Let's just make it 3 years to pay off the remaining debt and you must also not incur any new debt. The latter will be the most difficult part of this "save the credit" plan.

(Side note: it's amazing that in Chapter 13s, some really large creditors never file a claim. It could work to your advantage where you end up paying 100% of only 75% of your total unsecured debt. However, that's as speculative as a desire to payoff $100K of debt in 12-18 months.)

[rymetymeuk]

very good points again, thank you very much for your insight.

we will give it until the end of the month to get an offer, and if it isn't what we need i'll do the other plan.

you've helped me realize that i will be paying back the debt so I don't need to worry too much (not being flippant or extravagant though) but I don't need to sweat bullets thinking I'll get in trouble for buying groceries or gas.

thanks again justbroke, i appreciate your time and comments!