When to balance transfers raise a red flag?

[PaKettle]

I am concerned because a lot of my debt is balance transfers.

At first I played the game of using them to pay off higher interest debts, and that actually increased my credit rating and card limits.

Later, in the past year or two I took out quite a few just because my work was slowing down and I thought it would be good insurance to have the money in the bank to tide me over in case things got slow. Things did get slow and I used some of that money to make payments on other cards. I was making more than minimum payments in order to pay down my debt on higher interest cards.

I used some of the balance transfers as personal loans and used them for traveling and for gambling, as well.

All of these were more than 6 months ago, most were over a year ago, or close to it, and of course I made payments all this time on them. Only 2 were less than 3 months ago, they were under $1k but over $750, and I'm waiting those out to make them at least 3 months. However, those 2 were with BofA who I also owe other on other cards, up to around $25k or so, total.

So how much of this is going to raise red flags and what kinds of questions am I likely to get asked about them, and so on?

It seems to me that when a bank sends you offers in the mail (I wasn't going to them looking for the loans!) and says, basically, "Here, sign here and take this loan out! Use it for vacations! Or whatever you want!", then how can they turn around and say you were fraudulent in taking those loans and spending the money on gambling or whatever?

I did make payments for years on most of these accounts, so isn't it clear that I had no intention of not paying them back?

[dumbdumb]

I dont think it really matters what you spent the money on. whether you used this credit card to pay off that one or took cash and went on vacation. As long as you didnt take cash out and keep it for saving or give it to someone else such as a friend or family member. People try many different creative ways to try to save their butts from loosing everything and most get deeper in debt than they were before..

If you are thinking about filing for bankruptcy, make an appointment to talk to a lawyer. Take a means test to see if you qualify for bk.

[BassBoy]

I don't believe you'll be asked about the number the CC's you have and why you kept opening new accounts.

"Here, sign here and take this loan out! Use it for vacations! Or whatever you want!", then how can they turn around and say you were fraudulent in taking those loans and spending the money on gambling or whatever? LOL....I have to chuckle at this because I know how enticing these offers are.

If some of the transfers and cash advances are older than 6 months, I don't feel you'll have too many issues regarding this.

[RickInMich]

I don't believe you'll be asked about the number the CC's you have and why you kept opening new accounts.

"Here, sign here and take this loan out! Use it for vacations! Or whatever you want!", then how can they turn around and say you were fraudulent in taking those loans and spending the money on gambling or whatever? LOL....I have to chuckle at this because I know how enticing these offers are.

If some of the transfers and cash advances are older than 6 months, I don't feel you'll have too many issues regarding this.

I just wanted to point out that I met with my attorney yesterday, and he seemed a little concerned about the balance transfers. I transferred a large balance from MBNA/BoA to Capital One back in February. The "loan" was for $25,000, which I paid like $23,000 to MBNA/BoA and used $2,000 just to keep current on other debt. That's the one he was most concerned about. I have made consistent payments, but only 6 so far. I definitely have the paper trail showing I transferred form that MBNA/BoA to Captial One, but the attorney didn't seem to think that would help. It was his feeling that there was like a 25% chance that Capital One would sue me for recovery on that debt.

I've decided I'm going to pay at least Sept and Oct, which would make it 8 payments, maybe Nov and Dec, too. I know it's sort of like throwing money away, but I really don't want to be stuck paying off a large part of that $25,000. The attorney said maybe they'd settle for 60% of the balance. But that'll be close to $14,000. I might as well go for the Chap 13 in that case. That's why I think making a few more payments will help lessen that chance.

Rick

[CATCHMEIFYOUCAN]

I messed around with balance transfers and even got a new line of credit for $10,000 3 months before I filed and had gambled it all away. No issues about THAT during my BK. I guess it was just luck of the draw with me and being a gambler like I am YOU KNOW I was worried for a minute.

Best of Luck, Catchmeifyoucan

[JRScott]

The more distance you put between you and the transfer the better. Good Luck

[PaKettle]

Thanks for the replies.
I'm going to check for sure, but in any case, I've already stopped paying my accounts so whatever it is, it is.
I'm pretty sure I don't have any transfers of over $1000 in the past 6 months. I MAY have a couple of $5-7k between 6-12 months ago, I don't remember. I hope not!

I just really don't see how the credit companies have a leg to stand on about objecting, when THEY are soliciting YOU to sign and deposit those checks or make the transfers online, "as you please". As long as you took the money with intention to pay it back, and made payments for at least 3-6 months, I just don't see how they can rightfully object...

But has anyone here had them object and force them to pay the balance transfers back? If so, details please...

[HHM]

But has anyone here had them object and force them to pay the balance transfers back? If so, details please...

What typically happens, if the amount of the charge is large enough (usually $3K+) and the creditor has at least a better than average shot of winning an objection, the creditor will offer a reaffirmation agreement in lieu of the objection (essentially a settlement offer). The creditor will typically discount the balance due and allow you to make payments over 6-18 months. Of course, it is up to you whether you want to accept or reject the reaffirmation offer.

For example, lets say you did a balance transfer to MBNA 4 months before filing BK in the amount of $4,000. Odds are, MBNA would probably have an attorney make an appearance in your BK on their behalf. If you have an attorney, the attorney from MBNA will contact your attorney, inform your attorney of their intent to object and usually make some sort of offer. At which point, your attorney should contact you with the offer and discuss the ramifications. The offer might be $2,800 to be paid in 10 installments of $280 per month.

Creditors don't tend to object on "marginal" or "questionable" cases. The attorney representing the creditor will want a better than 50/50 shot at winning an objection. If the creditor's case is somewhat marginal, then the attorney will probably appear at your 341 meeting to assess the situation and ask you questions.

Most objections don't see the inside of the court room becuase almost without question it is in the best interest of the debtor to settle. The reason being, by the time you factor in the additional attorney's fees a debtor will need to pay to have their attorney defend them, and the odds of success of the objection, it is usually better for the debtor to settle. And honestly, in my experience, most of the time when a creditor objects, the debtor is "not that innocent"

(note, this scenario does not apply to "presumption period" claims of creditors, i.e. the 70/90 day rule stuff).

[Lindsay]

I've always been curious as to why all creditors don't try to object. We have 2 cards that were used recently for necessity purchases. Most of the others haven't been used in a year, we haven't done a balance transfer in 24 months, and we've never taken a cash advance on any of them. I know about the luxury items within 90 day period, but what are other circumstances where they would object? We owe Discover card about $10,000, haven't used the card in over a year, and we've made payments on time since we've had the card (until 45 days ago when we stopped). Is there any way that Discover would object? Their collectors are especially agressive.

I read about objections and it scares me. What would happen if you filed BK7 and all of your creditors objected? Most of our cards (except for 2 of them that were opened up just over 2 years ago) are 8 or 9 years old and all payments have always been made until the last few months. Could any of those cards object and are there specific rules in bankruptcy court that allow creditors to object even if you haven't done anything naughty?

This is something that I don't understand because it would seem to me that they would all want to try to recoup some money by objecting if it was possible.

[lrprn]

...it would seem to me that they would all want to try to recoup some money by objecting if it was possible.

Creditors can't object just because they want to. They have to prove to the court that the debt you owe to them should not be discharged because you took the money knowing you were going to file. Frankly that's very hard to do. That's why, as HHM said, creditors only go after the sure money, and also as HHM said, in these cases fraud is pretty obvious.

Do your best to keep this worry in perspective. The chances of your situation triggering an objection is so close to zero that it doesn't register on the worry chart!

[HHM]

lrprn is exactly right. There are only limited reasons a creditor (especially an unsecured creditor) may object to discharge.

The main issue is, that outside the 70/90 day provision, the creditor has to prove that you used the credit either with the "intent" not to pay it back, or "knew," or "reasonably should have known" you could not pay it back. As more and more time passes between the time you made the charge in question and the time you file BK, the harder those facts are to prove for the creditor. The average cutoff is about 6 months, charges/balance transfers older than 6 months are difficult to object too. But, I have seen objections on charges 8-9 months old...but those are rare, and the circumstances were that the debtor made large balance transfers but never made a payment.

Just because collection activity is heavy does not mean there will be a problem with your BK. I highly doubt you would hear a peep out of Discover in your BK under the circumstances you described.

[RickInMich]

I want to follow this up a little bit. I'm kind of like Lindsay. I'm paranoid about having objections or sub-lawsuits. Our situation, though, is much worse than Lindsay's.

As you all know, back at the beginning of this year I did all sorts of balance transfers to get lower interest rates. I was getting these credit card checks or, in the case of Capital One, personal loan offers for 4.9% for the life of the balance. So I moved several around until I've gotten them all to be under 5.9%. To sum up, this is what I think occurred. I just want your advice on whether to pay through December. (We will ask for a "gift" from her parents. Or do we have to call it a loan?)

Chase: Owed 3,000. Paid that off (with loan from brother.) Then used a Chase credit check to pay off brother, use some for living expenses, and paid 7,300 to BoA. So balance on that, after fees, was 13,657. Have paid 7 payments of 247-272 since then (Feb - Sept) No new charges since February.

BoA: Owed 7,300. Paid that off by balance transfer from Chase. Then ridiculously have racked that back to 9,900 since Feb. Large 2,000 purchase (moped) in May, 995 (bus equipment) in May, and $1,100 (front door) in June. Other expenses, too, right up until 8/31/07.

Cap One 1: Took a 25,000 "loan" and paid off an MBNA/BoA Gold account, which was 23,000, and used 2,000 on other expenses. Have made six payments on that, seventh one will be this month. Obviously, no new charges on this one either.

Cap One 2: Back in May of '06, opened "loan" of 17,000, which we paid the current BoA and Chase at that time. All payments made since June of '06. Obviously, no new charges.

So you can see, all we've been doing is transferring around the same debt to lower the interest. Understanding it's only your opinion, what do you think will happen? Should we finish out this year making payments?

Oh, that reminds me. Can you stop payments on some debt and continue on others, or does that show preferential payment? I know paying more than the minimum would be preferential. But what about just the minimums on some and nothing on the others?

Thanks for any and all advice. You guys have made this process bearable!!

Rick

[PaKettle]

I want to follow this up a little bit. I'm kind of like Lindsay. I'm paranoid about having objections or sub-lawsuits. Our situation, though, is much worse than Lindsay's.

As you all know, back at the beginning of this year I did all sorts of balance transfers to get lower interest rates. I was getting these credit card checks or, in the case of Capital One, personal loan offers for 4.9% for the life of the balance. So I moved several around until I've gotten them all to be under 5.9%. To sum up, this is what I think occurred. I just want your advice on whether to pay through December. (We will ask for a "gift" from her parents. Or do we have to call it a loan?)

Chase: Owed 3,000. Paid that off (with loan from brother.) Then used a Chase credit check to pay off brother, use some for living expenses, and paid 7,300 to BoA. So balance on that, after fees, was 13,657. Have paid 7 payments of 247-272 since then (Feb - Sept) No new charges since February.

BoA: Owed 7,300. Paid that off by balance transfer from Chase. Then ridiculously have racked that back to 9,900 since Feb. Large 2,000 purchase (moped) in May, 995 (bus equipment) in May, and $1,100 (front door) in June. Other expenses, too, right up until 8/31/07.

Cap One 1: Took a 25,000 "loan" and paid off an MBNA/BoA Gold account, which was 23,000, and used 2,000 on other expenses. Have made six payments on that, seventh one will be this month. Obviously, no new charges on this one either.

Cap One 2: Back in May of '06, opened "loan" of 17,000, which we paid the current BoA and Chase at that time. All payments made since June of '06. Obviously, no new charges.

So you can see, all we've been doing is transferring around the same debt to lower the interest. Understanding it's only your opinion, what do you think will happen? Should we finish out this year making payments?

Oh, that reminds me. Can you stop payments on some debt and continue on others, or does that show preferential payment? I know paying more than the minimum would be preferential. But what about just the minimums on some and nothing on the others?

Thanks for any and all advice. You guys have made this process bearable!!

Rick

Well, I don't know what you should do, since I'm new to this too, but it's nice to meet someone else who played the juggling interest rates game!

I personally wonder how the creditors can have ANY objections when they are the ones who write to you, unsolicited, and encourage you to make the balance transfers... And as long as they can't prove you KNEW you were going to file bankruptcy, then how can they object? But legally, I don't know what the answer is... Seems to me they were encouraging you to play a shell game and Capitol One lost by being the one holding the debt when you decided to file...

But I wonder if they have much of a reason to object in your case...? Good luck!

[Lindsay]

Well, I don't know what you should do, since I'm new to this too, but it's nice to meet someone else who played the juggling interest rates game!

I personally wonder how the creditors can have ANY objections when they are the ones who write to you, unsolicited, and encourage you to make the balance transfers... And as long as they can't prove you KNEW you were going to file bankruptcy, then how can they object? But legally, I don't know what the answer is... Seems to me they were encouraging you to play a shell game and Capitol One lost by being the one holding the debt when you decided to file...

But I wonder if they have much of a reason to object in your case...? Good luck!

I know that before we started to get into financial trouble, I would receive daily calls and letters from all of my creditors asking me to transfer balances to their cards. The truly ironic thing is that even when Chase and Discover raised my rates to 30% when I'd never been late, they still sent balance transfer checks in the mail on an almost weekly basis. So they claimed we were a credit risk and we had to be charged huge interest rates, but they still wanted us to transfer more balances to them! That's really strange.

[JollyGG]

We will ask for a "gift" from her parents. Or do we have to call it a loan?

It doesn't really matter. If it is a gift it will count into your income for the past six months. If if is a loan it will need to be listed as such and is fully dischargable in the bankruptcy. You can of course pay anything back you choose after bankruptcy

Chase: Owed 3,000. Paid that off (with loan from brother.) Then used a Chase credit check to pay off brother, use some for living expenses, and paid 7,300 to BoA. So balance on that, after fees, was 13,657. Have paid 7 payments of 247-272 since then (Feb - Sept) No new charges since February.


Rick

I see a possible problem here with payments to insiders. Would it be possible to wait until at least a year has passed since your payment to your brother?

As for the rest. Well time and a good lawyer are your friends. Start looking for a good lawyer now.
Just because you are waiting to put time between purchases and bankruptcy does not mean you need to keep up your cc payments. You have paid over six months on all of them. Now just stop paying them. Spend some time finding a good lawyers, then wait as long as you can and file when the time is right.