Got Summons from Amex ( COMPLAINTand objection to discharge )

[HHM]

based on your signature, you are $825 per month for 60 months, what is your percent to unsecured creditors?

As for interest accumulation, you will have to ask your attorney as I don't know the answer for certain, but since the fact that a debt being declared non-dischargeable does not effect any aspect your chapter 13, my guess is, the amount can only accumulate interest at the chapter 13 rate. Keep in mind, unless you are zero percent to unsecured, you are going to pay down the balance to some degree during the life of your plan.

Generally, in these types of actions, you would not be liable for the creditors attorney's fees, but you will have to pay your attorney...but your attorney will probably just take his fees out of the plan as a priority administrative expense.

[MajorMike]

I'm at 5 percent payback if everyone files a claim. Right now it's about 8 percent ( almost everyone filed )

[rrockinggramma]

Just remember that the burden of proof is on Amex not on you. They have to PROVE that you intentionally knew you were going to file. You can combat that with the first date you saw the attorney. If it was AFTER the gift card, then I think you are in the clear.

[MajorMike]

Thanks Gramma, it was definitely AFTER the gift card purchase that I saw an attorney. I think I saw him at the end of August. Gift card was end of July....I waited to see if sale would come in before taking desperate measures.

I've contacted my attorney so many times and he still hasn't called me. He's pissing me off too!

[MajorMike]

WEll, I FINALLY heard from my attorney today. I have to send him another $450 to file an answer to the complaint and then he said that we will probably have to go to trial to prove that it wasn't fraud and the judge makes the decision if our proof will outweigh their proof. He said he will then try to get the amount including in the BK if we lose but listen to this! HE DIDN"T EVEN READ THE AP YET!!!!!! He told me he has 500 clients on his desk and he will read it when he has time but he will file a STANDARD answer to the complaint. What the hell???!!! Is there any way I can get a new attorney if need be!! He is making me very nervous that we will lost this fight and make me feel like a criminal in the process!!!!!

[keepmine]

Realistically, the big problem you have is the timing.
Using a card for non luxury purchases and then filing within 90 days of the purchases will give Amex the presumption of abuse. I doubt that a judge will view gift cards as a necessity. I'd lean towards trying to settle this thing.

[HHM]

MajorMike, I wouldn't read too much into your attorney's actions, these AP complaints are fairly standard, as are the answers. So in the respect, it is really is no big deal that he has not read it. If he is even half way experienced, he could probably recite the jist of the complaint to you off the top of his head.

Also, representing you in this AP is outside the scope of his representation, so like it or not, until you pay him, he is not going to look at it.

But yeah, your main issue is timing and what you did with the card. Keep in mind, the "intent" that AMEX has to prove can be determined from your actions, they really don't need to prove your actual state of mind, i.e. that you really truly intended to defraud amex. What you will have to do is show that you really weren't planning on filing BK at the time you made the charges, and further that under the circumstances, a reasonable person, in your shoes, would not have thought that BK was on the horizon.

[MajorMike]

Right HHM. when I used the cards, I knew I had a good sale on the way and would pay that off. I had the card a year and always paid it off in full each month. The big sale DID come in but after I filed BK. If I was a scammer, I'd be smart enough to wait 90 days before filing, not file after charging. I didnt even see the attorney until a month after the charges, not the other way around. I know I owe the money, but just hope I dont have to have a jury trial or anything. I hope they will offer a settlement as well, but how would that work? I mean, I can see if I can up my payment but according to my schedules, it looks like we can't afford what we're paying now but we have to pay at least 5% to unsecureds according to our attorney. So, when the trustee said, it doesnt look like they can afford to fund this plan, my attorney said that we'd shave the extra off our food budget for the month because it was kinda high. The trustee agreed and approved the plan. Now, if I say, let's add $100 to it to pay Amex, I can't see the trustee okaying that, because number 1.) he'll want to know where we're going to get the money and number 2.) is it a preferential payment because we're only at about 20% payback right now with who has filed a claim. Deadline for claims is this Monday so I'll know for sure then.

My question is this, HHM. If they can get the judge to think their way and it goes in their favor, it will piss me off that I paid my atty $450 when it would just be a loss anyway and how much would they make us pay? Only $4900 was within 90 days but they're trying to get almost $7K cuz they are saying even though the $2K wasn't within the 90 days that I had no intention on paying that anyway....
Would I pay this after the 5 years are up or what???

[EveryDayAdam]

more than likely, you will only pay the charges that were incurred during the 90 days before filing. those charges would be presumed abusive. Any charges before that, they would have to prove abuse.

To put it simply: any charges made within 90 days before you file, it's your burden of proof to prove that it wasn't abuse Any charges made longer than 90 days before filing, it's their burden of proof to prove that the charges were abuse.

So, what will happen is that Amex will ask for their whole debt to be non-dischargeable, but your attorney will say that only the total amount of the debt within the 90 days before filing are. You can present a case to show that they aren't.

I think, worse case is you will have to pay for the charges made within that 90 days. I think you have a good shot of getting the whole thing dropped.

[MajorMike]

Hi Adam, why do you think I have a shot at getting the whole thing dropped? Amex paid $250 to file this complaint. I think that THEY think their case is solid.
My REAL question is, if I have to pay the $5K, how will I have to pay it?

[rrockinggramma]

250 for amex is nothing if they can scare you into settling. Go back and read some of the I am hopeless threads on a credit union that repo'd her van illegally. Although not the same, she had the wherewithall to stick with it and go after the cu. So in this case, you need to have the same resolve. I would start building your timeline especially showing the details of the "big sale" that didn't close etc. And the timing of your first vist to the BK attorney. It will be up to the judge and he may have you both meet somewhere in the middle, which is what amex is hoping. Even if they only get say 1000 out of you it was worth their 250 to file. I would fight them to the end and not give up. You might come out owing them nothing! And that is worth 450 to you (saving 4800)

GL and stand your ground

[diviaruba]

Not really.

Just remember that the burden of proof is on Amex not on you. They have to PROVE that you intentionally knew you were going to file. You can combat that with the first date you saw the attorney. If it was AFTER the gift card, then I think you are in the clear.

are presumed to be nondischargeabledebtor.

[MajorMike]

Thanks everyone. Yes, I followed that credit union story. That was something!
I don't think Amex will back down but you're right, they have to send their attorneys to our court which costs money and if they didn't think they could win, they wouldn't do this. I think they'll come out with 1/2 but that's ok, since I DO OWE the entire amount. Anything LESS, is a bonus.

[biotechsolution]

Is your attorney charging you to answer the adversary proceeding?? Most do not include that in the filing because it requires additional work and a court date in front of the judge, it's basically a mini-trial. I would guess that AMEX thinks they have a pretty good case because gift cards can treated almost like a cash advance. Worse case is you have to pay back the 5K after your chapter 13 ends and hopefully interest and late fees won't be tacked on at the end. How much is your attorney going to charge for the AP? Most tend to tack on at least another 1-2K to do an AP.

[diviaruba]

My REAL question is, if I have to pay the $5K, how will I have to pay it?

If you lose the presumptive abuse decision, the amount non-dischargeable may be included in the plan at the same percentage pay-back as other unsecured creditors, but if the nondischargeable debt is not paid in full under the Chapter 13 plan, the unpaid amount of the debt will still remain at the conclusion of the case. It is NOT a priority claim and as such, will not be paid in full under the plan.

While postpetition interest cannot be a claimed in a bankruptcy estate, there is some difference in case law as to whether when debts are nondischargeable, the postpetition interest is collectable from the debtor after the bankruptcy discharge.

The seminal case on this issue is Bruning v. United States, where the Supreme Court held that although postpetition interest on a nondischargeable tax debt could not be paid by the bankruptcy estate, it nevertheless survived bankruptcy and could be recovered personally from the debtor.

The Court reasoned that "interest is an integral part of a continuing debt," and becomes part of the debt itself. The Court distinguished between the disallowance of postpetition interest against the bankruptcy estate on a nondischargeable debt, and the creditor's right to recover postpetition interest on a nondischargeable debt from the debtor personally after the discharge has been entered.

Bottom line is that interest will likely continue to accrue on the non-dischargeable debt, the portion of the debt that is not paid down during the pendancy of the plan will survive discharge, and collection efforts on the unpaid principal and all post-petition interest accrued during the plan will begin in earnest after the discharge.

I would ask your attorney to make whatever inroads are necessary to settle this before it gets to hearing. You're going to have a tough time rebutting the presumption, based on the facts you've outlined here (you were insolvent enough that you needed to sell the purchased gift cards just to pay your bills), and it will cost big time over the long run if you lose.