Question for my friend

[MichMom]

My dearest friend is in a sticky situation. Over the summer she and her husband took out a $25,000 unsecured loan to pay off all of their credit card debt and their two car loans. They did this because it was going to save them about $110 a month, which was REALLY going to help their TIGHT budget. Then her husband being sweet but careless bought her a gorgeous diamond necklace on credit. There was just no way they were going to be able to afford this new pmt. So filing BK became something they were seriously considering. When she called a lawyer to ask some questions the lawyer said that they would be able to file and since she has all the CC's with zero balance to go charge them up. She said buy groceries, put all utilities, gas, everything on credit. She also said that it would be fine for her to go ahead and charge a breast augmentation as well. So my friend maxed out all her credit cards and got the surgery all in about 5 weeks. They paid for some classes, took a road trip, bought some new things. She told me that she wasn't even going to make any of the min pmts because the lawyer told her she didn't need to. Now that didn't sound right to me. Can't she get in trouble for that? Or at least not be allowed to file? I told her of my concern so she called the lawyer again just to be sure. Now all of a sudden the lawyer says that she needs to make the min. pmts from now right up until she files. Unfortunately she can't afford the min. pmts. The other part that concerns me is that she maxed out credit like the lawyer told her to but not the way she said to. She used it to buy clothes, a vacuum, a cash advance, a new TV (about $700, not a big screen), she paid for the trip that they had to take to attend a friends wedding and she took out a new CC to pay for her surgery. The lawyer told her to pay for utilities, groceries, gas....these things are all necessities. Old Navy and Kohl's don't sell necessities. So, any advice I can pass on to her on how to handle this? She's starting to freak out a little because her lawyer changed her story about the pmts she's afraid to trust anything the lawyer told her. They can't afford any of this stuff, even for a couple of months. This would look like a normal pattern for them though. They usually get a good sized tax refund ($6,000+) so they usually pay off debt and rack it back up. That is basically what they did. They started out legit, really needing the fresh start that BK provides but then the lawyer told them to spend and now she may be in a mess. Sorry so long, thanks for any advice.

[ssdsco]

I think the bottom line is she's going to have to wait 6-12 months before filing and learn how to deal with the creditors. Even then it looks like the creditors have valid reasons to object.

If there’s any way she should keep making minimum payments for a few months.

[Minnymouth]

Just because the lawyer told them to go out and "spend" - doesn't mea that they had too or needed too.............

Remember, they were trying to get out of debt - not further into it..............

The fact that the lawyer said "necessaties", not "luxuries" makes a big difference....

Also the fact that they did it all right before filing.............

DUH - hello red flag for the Trustee........................

Sounds like your "friend" needs to wait a year, find another lawyer, and pray that the Trustee doesn't go back an investigate previous years.......

Shoes for the baby - a Trustee will never question.........a boob job for mom - now thats a luxury................

Sounds like your friend has gotten themselves deeper in debt and now - NO WAY OUT............. ALL THAT EXCESSIVE SPENDING will not fly with the Trustee............ more than likely it will all have to be paid back...............

Just my thoughts.............

[magyar123]

That lawyer was/is FOS. I'd report him/her to every state, federal, local attorneys' oversight dept, needs to get license revoked

[rrockinggramma]

wow. Have your friend talk to a couple of other lawyers. Where is she in Michigan (eastern or western district) So your friend has an unsecured loan of 25,000 (signature loan? not attached to any collateral?) and now they have cc debt totaling how much? all within a short amount of time. Tell your friend that she probably will have to wait at least 6 months before she can file a chapter 7 due to the recent charges. Do the own a home? How much is their car worth, now that it is paid off (michigan exemptions are very low) But I would tell your friend to gather up all of her information, last 2 year tax returns, receipts etc and get thee to another attorney or two in Michigan quick. If you tell me where you live, I might be able to give you the names of a couple. I have used 2 in the Detroit area and there is one I would avoid at all costs.

[kiddles]

I'm thinking they're gonna be SOL no matter what - even if they wait 6 to 12 months - running up debts you KNOW you cannot pay, with no intention of paying, KNOWING you are going to be filing BK - that's fraud no matter how you look at it.

[rrockinggramma]

And because the exemptions in michigan are low low low, your friend might end up in a chapter 13 to keep the vehicle, now paid off etc. Equity in a home is god awful in Michigan also, like 7500.00 (but not sure now) and maybe 1500 for a car? A chapter 13 would definitely help them learn to budget but they would lose their big tax refund. In Michigan, the trustee takes all of it (federal at least) And your friend might be able to file quicker and then covert to a chapter 7 down the road? You need another attorney's advice, quick.

[Granny]

Tell your friend that she needs to immediately change her or hubby's W-2 at work. If she is getting a $6,000 refund every year, she can increase her income by 500.00 every month with just this one step. It's crazy to let the govt hold your money just so you can get a refund. I understand why people do it, but that doesn't make it any less crazy.

When she files her Ch 13 in 6 - 12 months, she'll want those withholdings correct anyway because the trustee will see right through it and possibly zap that refund anyway.

[RickInMich]

And because the exemptions in michigan are low low low, your friend might end up in a chapter 13 to keep the vehicle, now paid off etc. Equity in a home is god awful in Michigan also, like 7500.00 (but not sure now) and maybe 1500 for a car? A chapter 13 would definitely help them learn to budget but they would lose their big tax refund. In Michigan, the trustee takes all of it (federal at least) And your friend might be able to file quicker and then covert to a chapter 7 down the road? You need another attorney's advice, quick.

They can use the Federal exemptions in Michigan, though. I think they're better on the equity in the home. I think.

Also, rrockinggramma, do they take the refund in Ch. 7 cases, too? I'm in the Eastern District.

[nc73]

Tell your friend that she needs to immediately change her or hubby's W-2 at work. If she is getting a $6,000 refund every year, she can increase her income by 500.00 every month with just this one step. It's crazy to let the govt hold your money just so you can get a refund. I understand why people do it, but that doesn't make it any less crazy.

When she files her Ch 13 in 6 - 12 months, she'll want those withholdings correct anyway because the trustee will see right through it and possibly zap that refund anyway.

Some people are just plain stupid though. They think it's a savings account..

[rrockinggramma]

http://www.mieb.uscourts.gov/rulesAndForms/LBR.pdf

[ssdsco]

a boob job for mom - now thats a luxury................

could be an asset