Over 50k in CC debt, now sued - does Chapter 7 really work?

[bornfree2]

Im reading on here that some people have success in chapter 7 wiping out their debts.
Then i read from others that large (over 30k) debts owed to credit card companies are challenged during BK.

All i have a is a car and some little savings in the bank to cover this and next month expenses. Thats it.

I have no job, havent been employed for over year (pandemic), and well the combination of issues has brought me to this point.

And i got a summons 2 weeks ago so the dominos are starting to fall

I didnt use the credit cards for over year... nor pay them.

So is BK7 even worth it if these credit card companies can just object , claim fraud etc and try to kill me with attorney fees, court costs, etc to defend myself?

I mean whats the point of BK7 if they have the option to continue to go after you?

I honestly think sometimes this whole 'fresh start' thing is a farce to get people into the circus so lawyers and 'the system' can collect fees and make you their debt slave for the rest of my life

Where is the hope?

[justbroke]

I don't think you'd have any issues filing a Chapter 7 and receiving a discharge. You have a lot of distance between the debt and even using the cards.

I know that it's scary, but I discharged over $1 million dollars in debt in my Chapter 7. The numbers don't matter. It's the behavior of the individual which causes issues. I don't see any behavioral issues with your case since you haven't even been using credit cards for over a year.

[bornfree2]

So am i incorrect in thinking the large (35k on one account) creditor will challenge me? I mean isnt that what they all can do as their right?

One million dollar in debt cleared? You must have gotten tips from the orange man in Maralargo. dammmmn

edit: starting to learn to use the search . i found this from justbroke

Theoretically, a Chapter 7 discharge will discharge all debt that could have been included at the time of filing. There is an exception and that is generally where the Chapter 7 becomes or is an asset case. When it's an asset case, creditors must have a chance to file a claim. If it's a no-asset case, then there is no money to distribute.

Your attorney may not have scheduled (listed) certain utility accounts to help avoid a potential problem with "new" deposits. This is because the utility is entitled to offset old deposits with what you owed them, and they are allowed to request a new deposit. It can get a bit complicated, so you don't include a utility company unless you really need to do this and do it strategically.

Bottom line is that a no-asset chapter 7 case discharges all debt prior to filing. (As I stated earlier, it does not change any liens that you may have, especially where the lien is consensual.)

So the key here is to have my case be no-asset. And that is up to the trustee to determine. I also read elsewhere they can switch you between asset to no-asset during the case.

[bcohen]

Just to be clear, it isn't the size of the debt which leads a creditor to challenge the debtor's right to discharge their debt--it's whether or not the creditor can make a clear-cut case for abuse. This typically means that the debtor lied on their application and had no realistic chance of repaying the debt at the time it was incurred, that the debtor incurred the debt and then filed for bankruptcy soon afterwards, or that the debt was incurred for the purchase of luxury goods while the debtor was insolvent.

Due to the amount of time which has elapsed from when the debt was incurred until your (contemplated) bankruptcy, there is no presumption of abuse--no matter what the money was used for--unless the creditor can prove fraudulent intent. Basically, unless you lied on the initial application and said you were employed and earning X amount of money, while in actuality you were unemployed and broke, the creditor has no case--and they know it. Creditors do not generally file an objection unless they have clear evidence of abuse. Taking out a loan and subsequently losing your job and defaulting on the debt is not abuse--it's the very reason bankruptcy exists!

[bornfree2]

Due to the amount of time which has elapsed from when the debt was incurred until your (contemplated) bankruptcy, there is no presumption of abuse--no matter what the money was used for--unless the creditor can prove fraudulent intent. Basically, unless you lied on the initial application and said you were employed and earning X amount of money, while in actuality you were unemployed and broke, the creditor has no case--and they know it. Creditors do not generally file an objection unless they have clear evidence of abuse. Taking out a loan and subsequently losing your job and defaulting on the debt is not abuse--it's the very reason bankruptcy exists!

The two credit card accounts were opened back in my college days (over a decade+). I have no idea what i filled out in the original application but i do know i was a student with no job and they gave me like $200 in credit.

Throughout the time, i get credit line increase after credit line increase from them. Balance transfer offers etc etc to baloooon it.

I can no longer log into my account, but i remember in the past when i would log in they would try to get income information from me. I never filled it out because i knew it was a voluntary question since i could skip out of it if i just reloaded the page.

So basically they would have to prove it right? But its the whole court process / cost/ lack of attorney which i think they know they can intimidate me with to defend myself.

Maybe im being paranoid, maybe this is a clear cut case. I just want to see every eventuality that others have and better prepare myself

[jst4f]

This site is excellent for information and insight into the BK7 process. Another source is your local BK attorney. Many will provide an initial consultation for free. Perhaps a face-to-face discussion will help reduce your anxiety and increase your confidence in your decisions going forward.

[justbroke]

So am i incorrect in thinking the large (35k on one account) creditor will challenge me? I mean isnt that what they all can do as their right?

Any creditor can challenge you but that would cost them $$$. This is why we say that most creditors don't waste their time objecting to things that are difficult to prove. As bcohen wrote, it's not the size of the debt. It's whether or not it was done while you were insolvent or there is actual fraud. Since you are only presumptively insolvent 90-days before filing, that's not an issue in this particular case. The only thing the creditor could attempt to prove is actual fraud. The bar for that is extremely high.

One million dollar in debt cleared? You must have gotten tips from...

Many people discharge debt. The Bankruptcy Act was established in 1898 so has been around a lot longer than any living person. (Last major modifications were under the BAPCPA in 2005)

Discharging debt does not mean that the creditor is stuck with $1,000,000 of debt or didn't already recover the debt (due to interest accrual). In my case, the +$1M was two homes which accounted for over $1,000,000; the creditors sold them and only at a modest loss. Whether an individual, not a business, discharged $30,000 or $30,000,000 it's all the same. Another tidbit of information about bankruptcy is that the bankruptcy absolves the individual debtor of the legal responsibility to pay (in personam). That's it. If the property/asset was pledged as collateral, such as a mortgage, then the creditor can go after the asset (in rem).

So the key here is to have my case be no-asset. And that is up to the trustee to determine. I also read elsewhere they can switch you between asset to no-asset during the case.

An asset case does not factor into a determination of what is dischargeable. Dischargeability and non-exempt assets are two different things. A no-asset case simply means that the (Chapter 7) Trustee has found assets to liquidate or recover for the bankruptcy estate.

Maybe im being paranoid, maybe this is a clear cut case.

As most of us have, and future debtors will, you are overthinking this.