Too much debt?

[Brokerthanbroke]

This from another thread brings me to post an interestign question

The proportion of debts to assets and income may raise a flag to the US Trustee. If you are slightly over the median and owe 200k on consumer debts they may ask for additional paperwork. If you made six figures at the time it was incurred and are now making a much lower income due to circumstances beyond your control then that should be fine. Medical and business debts that high are ok too. If they are all credit cards and loans be prepared to explain where it all went.

So we over $200K in CC and Loan debt. The last 2 years have been really rough. Alot of it was used to "make ends meet" while trying to get business off the ground and then to survive after DH was injured...and still try to keep businesses going through the rough patch.

So what are they going to say about where the money went? We played the balance transfer game for a lot of it..and it just added up. We spent 26K on a business opportunity that failed from the get-go. Lots of distributors around the country were left high and dry...not just us.

We don't have nice furniture, flashy jewelry or a big house. I've added it all up and I do realize we have a really bad fast food habit! Do you think the McDonald's addiction would get it thrown out?

[lrprn]

This from another thread brings me to post an interestign question

The proportion of debts to assets and income may raise a flag to the US Trustee. If you are slightly over the median and owe 200k on consumer debts they may ask for additional paperwork. If you made six figures at the time it was incurred and are now making a much lower income due to circumstances beyond your control then that should be fine. Medical and business debts that high are ok too. If they are all credit cards and loans be prepared to explain where it all went.

So we over $200K in CC and Loan debt. The last 2 years have been really rough. Alot of it was used to "make ends meet" while trying to get business off the ground and then to survive after DH was injured...and still try to keep businesses going through the rough patch.

So what are they going to say about where the money went? We played the balance transfer game for a lot of it..and it just added up. We spent 26K on a business opportunity that failed from the get-go. Lots of distributors around the country were left high and dry...not just us.

We don't have nice furniture, flashy jewelry or a big house. I've added it all up and I do realize we have a really bad fast food habit! Do you think the McDonald's addiction would get it thrown out?

Any time business debt is mixed up with personal debt, the trustees seem to sit up and take greater notice. Be sure you have a good accounting of both sides of your ledger and can document where all the money went in on both the business side and the personal side if asked. Not trying to scare you....a lot depends on your trustee and how picky he/she is. Just remember your case may be looked at more closely than a straight consumer debt only filer's will. Keep us posted on what's happening with your case, ok?

[CATCHMEIFYOUCAN]

I would say my Gambling would raise more questions than a Fast Food Habit

Best Wishes, Catchmeifyoucan

[FoolAndHisMoney]

I mentioned it on the other thread and I got this information from the US Trustees web site in their annual reports. They seem to look at the proportion of debts to income and assets and the purpose of the debts. Just because it raises flags doesn't mean your through. They would just request cc bills and bank statements for 1 to 2 years. If someone bought 200k worth of jewelry and other luxury items they want to make sure the assets are listed. If they are not listed then where did they go and what did the debtor receive in return and where did that money go? I guess they have seen bust outs where debtor buys jewelry, sells it below market value and hides the money. The credit card company may also claim that a low income earner bought luxury items with no real ability to pay.
These are some scenarios I found through research. I don't have any specific cases. I did read one case once where a 100k debtor that earned 20k then was disabled still racked up debt with no real ability to pay and a portion of the debts were not discharged.

Again, having 200k in debt doesn't make you a fraud just be prepared to gather years of paperwork if requested. Some here went through this especially for small business owners and gamblers.

[sisterfunkhaus]

It was my thread that you posted on. I'm glad you went into more detail on your statement. I was worried, but I'm not so much now b/c we haven't done anything wrong, sold anything, etc...We were paying back and and never made a late payment over 12 years until July. So we obviously had the ability to pay back b/c we were doing it/did it for 12 full years without even one late pay. We didn't just charge stuff for fun when we obviously didn't have the means to pay it back. We intended on paying it back, but we were also one paycheck away from toppling financially. If anyone looks at my credit card bills, they will see car repairs for our older cars, tires, home repairs (not improvements) groceries, medicine, doctor bills, eating out (some), and necessary clothing from modest clothing stores. We have so many reasons why we ran up almost $100,000 in consumer debt (the rest is student loans.) Most of it WASN'T done in the last two or three years ( only a small portion). It's been building up for MANY years for many reasons over a very long time. The US trustee would be hard pressed to prove or find that we had committed any kind of fraud.

Broker than Broke- I think that as long as you did nothing wrong, you are okay. Like A Fool and His Money said, they are most likely trying to root out people who did something wrong. Just becasue they look at you and ask for forms doesn't mean you are in trouble. They are just looking for fraud. Using credit cards to buy every day items, including McDonald's, and to make ends meet isn't a crime. Many people use personal money and credit cards to finance their businesses--especially if it is a smaller home business type venture. They probably see that every day. I wouldn't worry about that too much. Just be able to explain where it went and don't fret it too much.