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I'm avoiding credit and my bank covered an overdraft. It's credit, right?

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    I'm avoiding credit and my bank covered an overdraft. It's credit, right?

    I'm just shy of 30 days into my 90+ days of cash-only living and avoiding all forms of credit.

    Among the reasons the 90 days is important to me is because the months leading up to the bankruptcy decision consisted of charging living expenses and using my paycheck to make credit card payments. I didn't realize at the time, but now I know that there's more than $3,000 a month worth of charges on my credit -- approximately $10,000 in the 90 days before I started living on cash only. Even though virtually everything I charged is non-luxury, I'm not sure it's a good idea to file without puting some time between me and those charges because they add up to a bunch of money.

    To make matters more difficult, my wife and I visited a world-renowned clinic 400 miles away so my wife could be seen for some ongoing medical problems and we stayed out there for a week. On the way home I had a connecting rod fail in my engine and got stuck with the wife and three kids 150 miles away from home. The hotel reservations for the week we spent at the clinic were prepaid at $79 a night and they were one of the last charges I put on credit. We made the actual trip and recovered the broken vehicle using nothing but cash and luck.

    Weighing my options, I decided it was best to replace the engine and keep the truck running because I could do it myself for a bit more than what it would cost to repair the old one, and a bunch less than the cost of replacing the vehicle. I spend just less than $2,000 and bought a new engine on eBay.

    The problem comes when I paid for the engine because I intended to use my last dollars of remaining credit to buy it and take my chances on the other end to see if it would get discharged or not. Either way I needed the engine because replacing the truck isn't an option at this point.

    I accidentally made the payment in a way that debits my checking account and let it slide because I was supposed to fail over to my credit card. To my surprise and dismay, the check cleared the bank! The bad news is that the bank cleaned out my checking account and loaned me $1,000 from my formerly paid-off line of credit before they caused my account go nearly $500 negative.

    I know the next payday deposit will bring the account back above zero but I'm agonizing over what to do with the line of credit. I'd like to pay it back before I file but I think that'll cause some problems all its own. Will this whole event be seen as a luxury purchase? Will it cause troubles because it's greater than $600? Was this a technically a cash advance? Blah...

    This account is with a credit union -- the same one that holds the loan on the broken truck. I also have a credit card with them with a $5,000 balance or so plus the now maxed-out $1,000 line of credit. Because the accounts are supposedly all cross-collateralized, I probably can't get the title to the truck until everything is paid. Despite all of this, I'd actually like to maintain my membership and make good on all of the accounts. It'll probably cost me $12,000 to keep my $6,000 truck.

    The alternative is to buy something else after bankruptcy (with no credit) and struggle to take care of a family of five with only one good vehicle until then.

    Sorry for balthering on-and-on but I needed to get it off of my chest. Any advice or comments are welcome.
    Discharged November 2008 100 days after filing no-asset Chapter 7. We intended to let a two-year-old vehicle go back to the bank and reaffirm an inexpensive ten-year-old SUV and our home mortgage. In the end we surrendered ALL of our vehicles and reaffirmed NOTHING. We'll "ride through" our mortgage after the court ruled it an undue hardship.

    #2
    Keebler, you've had a rough patch, that's for sure.

    The 90 day delay with no credit card use before filing is to shift the burden of proof from you to your trustee. It seems to me that your uses were legitimate and were not taken out with the intent to defraud. The overdraft is considered unsecured, so can be discharged with the rest of your debt. It's the timing that's the issue.

    If you can wait it out another month or two, that would be to your advantage. If you can't, then you may have to take your chances. Some of our members have taken out loans, cash advances, and used credit cards up to a month before filing and were fortunate enough to be discharged anyway.

    An experienced bk lawyer can give you an idea of how rigid the trustees in your district are about recent charges and other financial transactions right before filing. Have you talked to 3-4 experienced lawyers during free consultation visits yet?
    I am not a lawyer and this is not legal advice nor a statement of the law - only a lawyer can provide those.

    06/01/06 - Filed Ch 13
    06/28/06 - 341 Meeting
    07/18/06 - Confirmation Hearing - not confirmed, 3 objections
    10/05/06 - Hearing to resolve 2 trustee objections
    01/24/07 - Judge dismisses mortgage company objection
    09/27/07 - Confirmed at last!
    06/10/11 - Trustee confirms all payments made
    08/10/11 - DISCHARGED !

    10/02/11 - CASE CLOSED
    Countdown: 60 months paid, 0 months to go

    Comment


      #3
      A clean cut with the Credit Union seems like the best option to me. Give the truck back and figure out a way to get something different. This way you are able to include this 12000 in your bk.
      Chapter 7 Pro Se....Discharged Feb. 2006

      Comment


        #4
        Since the CU owns the title to the truck they most likely can take possession of it after you file. In a bankruptcy you have to list all your debts, and there is no real option to reaffirm non secured debt.

        As hard as it might be it is probably best to make another account away from the CU, an account at a bank or credit union where you have no loans etc.

        There's no point in paying 12000 dollars for a truck you owe 6,000 dollars for and is probably worth even less than that. Its just not a good plan.

        I know it would be hard in a family of five with only one vehicle, but that might be the best course for the moment, perhaps you can pick up a cheap car/truck with lower payments during the course (usually if done during the bankruptcy these are a 722 exemption for a replacement vehicle))
        May 31st, 2007: Petition Filed by my lawyer
        July 2nd, 2007: 341 Meeting Held
        September 4th, 2007: Discharged and Closed.

        Comment


          #5
          Originally posted by lrprn View Post
          Have you talked to 3-4 experienced lawyers during free consultation visits yet?
          I did extensive research on Attorneys in my area and interviewed the three best choices in my area. I picked the best one who also happens to be the least expensive and then I found out later he's a Trustee.

          All of this happened before my doomed trip so I haven't had a chance to talk to him or even retain him since then. In the mean time I've been pulling information together and getting ready.

          Originally posted by cindylynnsmith View Post
          A clean cut with the Credit Union seems like the best option to me. Give the truck back and figure out a way to get something different. This way you are able to include this 12000 in your bk.
          I see the wisdom of that suggestion but there's not too many choices available at the moment. If there's a better way I won't rest until I figure it out!

          Originally posted by JRScott View Post
          Since the CU owns the title to the truck they most likely can take possession of it after you file. In a bankruptcy you have to list all your debts, and there is no real option to reaffirm non secured debt
          I'll have to ask the attorney how that works exactly. If that's true, it becomes and all-or-none proposition where the "all" part isn't even available.

          Originally posted by JRScott View Post
          As hard as it might be it is probably best to make another account away from the CU, an account at a bank or credit union where you have no loans etc.
          I've done exactly that already. However, the truck and the debts are hopelessly stuck together.

          Originally posted by JRScott View Post
          There's no point in paying 12000 dollars for a truck you owe 6,000 dollars for and is probably worth even less than that. Its just not a good plan.
          The $6,000 figure was wholesale/trade-in before it broke. Today it's a probably a $1,500 truck!

          Originally posted by JRScott View Post
          I know it would be hard in a family of five with only one vehicle, but that might be the best course for the moment, perhaps you can pick up a cheap car/truck with lower payments during the course (usually if done during the bankruptcy these are a 722 exemption for a replacement vehicle))
          Today I have no money or credit available to replace the vehicle at any price. During (or right after bankruptcy) will be an awful time to borrow money for a replacement and it'll be months before I have any kind of savings. Even if I do manage to get a loan, it'll be sub-prime where I'll be preyed upon by dealers selling crappy cars above retail prices and collecting double-digit interest rates. It'll probably cost me $12,000 to finance a $6,000 vehicle in worse condition than the one I've got.

          I don't see any other alternatives right now.
          Discharged November 2008 100 days after filing no-asset Chapter 7. We intended to let a two-year-old vehicle go back to the bank and reaffirm an inexpensive ten-year-old SUV and our home mortgage. In the end we surrendered ALL of our vehicles and reaffirmed NOTHING. We'll "ride through" our mortgage after the court ruled it an undue hardship.

          Comment


            #6
            Cash Advances

            Quote: IRPRN The 90 day delay with no credit card use before filing is to shift the burden of proof from you to your trustee. It seems to me that your uses were legitimate and were not taken out with the intent to defraud. The overdraft is considered unsecured, so can be discharged with the rest of your debt. It's the timing that's the issue.

            If you can wait it out another month or two, that would be to your advantage. If you can't, then you may have to take your chances. Some of our members have taken out loans, cash advances, and used credit cards up to a month before filing and were fortunate enough to be discharged anyway


            Just from my experience:

            I applied for a new credit card (with Navy Federal) in March 06' and received a $10,000 limit in APRIL 06'. I transferred the $10,000 to pay off another credit card. By end of April I wiped out $10,000 on a gambling spree at the casinos. I filed Bk end of July 06' .. I went for Ch13 not only because I had 2 full time jobs but also because I didn't want to risk objections due to the cash advances - so at least the creditors would see that I was paying them back. I'm assuming I fell within the 90 days, I guess you can consider me lucky that I had no objections from any of the creditors or with the Trustee. A couple months into the plan by Oct 06, I decided to quit one job and convert my case to Ch7. I had to basically start all over but by than several months had passed, so maybe that gave me more time between the cash advances and "dragging" out my BK - I guess. Again no objections by creditors or Trustee. I guess it all depends on the the Credit Union or creditor - how anal they become. As I read through the forum, some creditors are very anal even for as little as a couple thousand. So who knows, maybe I slid right under the radar as the New Laws start to kick in (by trial and error) and creditors/Trustee and the whole Bk system takes a grasp of these new laws.

            Just lending my experience.

            Best of Luck, Catchmeifyoucan
            July 2006: Filed Ch13 :blink:
            Oct 2006: Converted to Ch7 :clapping:
            Jan 2007: DISCHARGED :clapping:
            Nov 2007: CLOSED :yahoo::yahoo::yahoo:

            Comment

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