When Is It Time To Stop Paying CC

[Sammie]

Hi,

Never in my life did I ever think that I would be asking this question. I am very grateful for finding this welcoming and enlightening Forum.

We are filing for Chapter 13 next week and wondering when do we stop paying the CC bills? We are current and nothing is due for another week or so. Is it advisable to make the min. payments this month until we file? Or do we just stop.

Thank you for your advise. sammie

[andy158]

Cease paying any cc's and/or any unsecured debt immediately! Any payment to these is money wasted and can be used toward your lawyer/bk fees. Your are not going to make a difference making a minium payment. It isn't going to save your credit in any way.

Your lawyer should have advised you at your first appointment to do so. Only continue to make payment on the assets you plan to keep.

[keepsmiling]

What andy said.
Ummm... not sure you want to go with a lawyer who didn't tell you this straight up.

[Sammie]

I tried to reply to the both of you before but for some reason I could not get my reply to post.

Thank you so much for your responses. What you said makes perfect sense. Our Attorney did tell us not to pay the CC, but because of our pride we thought that we would pay until we filed next week, but after your replies we realize that it really is not going to make a difference and our 700+ credit ratings will be a thing of the past, at least for awhile. sammie

[AngelinaCat]

'Hub and I had a credit score of 820 when we filed. And we hung on and hung on well past the time we should have filed. We liquidated a 401k Retirement plan, and other things trying--as you said, "our pride"--kept us trying to dig ourselves out of the hole. And it was all for naught. Please say that you have NOT raided a 401k, or other retirement plan.

[Sammie]

Angelinacat That is the straw that did us in, yes, we took out $42,000+ out of the 401 last year and "thought" we had put enough money away (after speaking to our Acct.) to pay the 10% penalty in this years Taxes. After paying down CC debt, we were feeling confident until Tax time came around & the 10% turned out to be 35% pay back Penalty. We did not have the extra money so we divided the balance on two zero balance credit cards. We have had the same NJ Acct. for over 20 yrs. & still use her even though we moved to NC some yrs. ago & we did not have any reason to doubt her. All the debt we paid back last year was for nothing.

[frogger]

Angelinacat That is the straw that did us in, yes, we took out $42,000+ out of the 401 last year and "thought" we had put enough money away (after speaking to our Acct.) to pay the 10% penalty in this years Taxes. After paying down CC debt, we were feeling confident until Tax time came around & the 10% turned out to be 35% pay back Penalty. We did not have the extra money so we divided the balance on two zero balance credit cards. We have had the same NJ Acct. for over 20 yrs. & still use her even though we moved to NC some yrs. ago & we did not have any reason to doubt her. All the debt we paid back last year was for nothing.

I think many of us have been guilty of the same thing. If people don't learn anything else, they should learn to NEVER take an exempt asset and pay an unsecured debt. It's sheer folly.......

[AngelinaCat]

Angelinacat That is the straw that did us in, yes, we took out $42,000+ out of the 401 last year and "thought" we had put enough money away (after speaking to our Acct.) to pay the 10% penalty in this years Taxes. After paying down CC debt, we were feeling confident until Tax time came around & the 10% turned out to be 35% pay back Penalty. We did not have the extra money so we divided the balance on two zero balance credit cards. We have had the same NJ Acct. for over 20 yrs. & still use her even though we moved to NC some yrs. ago & we did not have any reason to doubt her. All the debt we paid back last year was for nothing.

I certainly do hate to read that..... *sigh*

[Sammie]

I don't think I have ever been so frightened of the unknown & just disappointed how things did not work out as much as we tried to make them happen.

Thank you AngelinaCat for being so nice. sammie

[ksgirl38]

What andy said.
Ummm... not sure you want to go with a lawyer who didn't tell you this straight up.

I would second that. Every consultation I went to this was the first thing they told me.

[ValleYum]

After paying down CC debt, we were feeling confident until Tax time came around & the 10% turned out to be 35% pay back Penalty. We did not have the extra money so we divided the balance on two zero balance credit cards.

So you paid your 2011 income tax(es) directly with a credit card?

To any of the gurus out there: If the taxes were paid by cc, would that cause a dischargeability issue for the amount of those 2011 taxes in a Chapter 13, too? Or will it just change the "priority" of that debt for repayment in a 13?

[pamkev]

Angelinacat That is the straw that did us in, yes, we took out $42,000+ out of the 401 last year and "thought" we had put enough money away (after speaking to our Acct.) to pay the 10% penalty in this years Taxes. After paying down CC debt, we were feeling confident until Tax time came around & the 10% turned out to be 35% pay back Penalty. We did not have the extra money so we divided the balance on two zero balance credit cards. We have had the same NJ Acct. for over 20 yrs. & still use her even though we moved to NC some yrs. ago & we did not have any reason to doubt her. All the debt we paid back last year was for nothing.

So sorry to hear this we came dangerously close to doing this when cc bills were piling up. We even had the paperwork in hand and ready to turn in but always in the back of my mind was hearing never touch your 401K and we listened to our inner voice and didn't hand it in. I'm so glad now we didn't touch it. Pam

[Floridagail]

Did you let your attorney know you paid your taxes with 2 ccs last year? Were they cash advances or charges to pay the taxes?

[Sammie]

We have been up front with our Attorney with everything. It was our Acct. who advised us to take a cash advance for the taxes & the Attorney said that he has had a lot of clients that take cash advances because it is a smaller % rate. We know that this will not be included in our payment plan, it will have to be paid off monthly by us.

[ValleYum]

Income taxes charged to a credit card are non-dischargeable in bankruptcy. Income taxes paid by cash advances taken from a credit card may be a grayer area, I am not sure. Anybody know?? HHM, MsBK, Des??

Taking a cash advance may throw a red flag to the banks as April 15th was only 90 days ago... I am not being mean when I say that the cards could file APs (objections) since you charged a total of $14,000+ to them and are filing so quickly afterwards.

Take care and good luck next week.