How is a credit limit increase handled?

[southernbelle]

[Dirk Squarejaw]

I don't think it would make any difference if you aren't using your cards. If you got the increase and went on a shopping spree and ran up your balance to the new limit, then yes, but not if the company just bumped it up on their own.

[SinkingFast]

The CC where you have other loans,.......... The mortgage,........ Check the Contracts and see if there's a Cross Collateralization clause. If the Cross Collateralization clause is in your CC or your mortgage contracts, the Lender might be able to tack the CC balance onto your mortgage.

Did you plan to keep your house and Reaffirm your mortgages?

Everything is negotiable when it comes to settling debts in BK. The original terms could remain in place. The interest rate could change or go to as little as no interest. How long you'd have to repay. Even the balance amount. The Lender could settle for less than what you owe.

[southernbelle]

There are two credit cards. The first credit card is with bank A that I don't have any other accounts with. It is a card that I've had for years and I got the credit increase because I needed to get money for my home A/C replacement of $3300. I did that because I didn't want to wait until my credit was bad to try to get money for such a large purchase. I guess I got desperate and didn't want to put all of my eggs in one basket and really didn't expect to get approved by either because of my debt to income ratios. Well, both banks approved me, meaning, I was given the increase from A and used a small portion of it for incidentials and bank B approved me for a new card with a 5k limit on the same day.

Bank B is also the bank that I have my 2nd mortgage and a signature loan with. Unfortunately, the last lawyer I spoke with made mention of a "Gorilla Clause" which I think is the same as the Cross Collateralization clause you mentioned Sinking Fast. Since I'm not behind on my mortgage, I plan to keep my house and I think they can tack on the other payments to the 2nd mortgage.

If I've decided to stop paying all unsecured creditors, does it look suspicious or can it be called preferential payments if I only pay bank B on it's 3 loans or do I just stop paying everyone and settle up with them during the BK? I am also hesitant about only making one payment for my mortgage to them and letting everything else get behind. And to make it sound worse, the A/C was replaced in late Oct. 07 and I just received the first bill about 2 weeks ago, so I have yet to make the first payment and planned to file BK in Feb 08.

I've sent an email to the lawyer I planned to hire, but didn't know if anyone here has had to deal with this kind of thing before. I appreciate all of your help and knowledge.

[SinkingFast]

The Gorilla Clause is probably a Cross Collateralization clause. Since the attny talked about it that way.

As far as making payments on that card,............

What's the minimum they're asking for in the way of payment on Bank B's CC??

If you can pay the minimum and keep the $$$ amount below $600 for the 90 days prior to filing, you'll be fine as far as Preferential Payments goes. The Trustee won't go after the money you pay if the total amount over the last 90 days prior to filing is less than $600.

If you're gonna keep your house, you're gonna have to stay current on your mortgages. Ch 7 is liquidation BK. If you're not current on your mortgages when you file, the Lender can just file a Motion to Lift Stay and begin Foreclosure proceedings. That includes your Second.

[southernbelle]

The minimum for that card is $73.00 and my current balance is $3625. Just to make sure I understand how Preferential Payment goes, is the $600 for ALL payments made 90 days prior to any creditor or just to one creditor because the other 2 bills will push me over that limit in 90 days because I have the mortgage $200.37, signature loan $234.70, and cc $73.00 ($200.37 of that is a secured payment).

Is it even possible to pay something towards these bills but not necessarily the min. like $25-$75 to keep them from hassling me, but a smaller payment so that I don’t exceed the $600? Will that look suspicious because I don’t plan to pay other unsecured creditors?

Does the credit increase even matter with the other cc since I’ve had it so long and Dec. will be the first month in years that I will miss a payment? Thanks again.

[SinkingFast]

Just to make sure I understand how Preferential Payment goes, is the $600 for ALL payments made 90 days prior to any creditor or just to one creditor because the other 2 bills will push me over that limit in 90 days because I have the mortgage $200.37, signature loan $234.70, and cc $73.00 ($200.37 of that is a secured payment).

Our attny told us it's Line of Credit by Line of Credit. If that's indeed the case, payments on the CC have nothing to do with the Signature Loan. And the the CC and SL have nothing to do with the Mortgage.

The 2nd is fine to pay anyway. It's a Secured and you intend to keep the house. You have to be current on your mortgages when you file in order to keep the house.

That's what one attny told us to do. We had a $500-$600 charge on one CC within the month prior to visiting the first attny for a Consult. He suggested we pay something on that CC for 2-3 months to show good faith.

I've also read because you wouldn't be making your minimum, from the Creditor's perspective, $20 is like you didn't make a payment at all. And that's what another attny told us also. If we were gonna file anyway,.......... By the time we got to filing,........ It really wouldn't matter.

In your case tho, the loan is with a Lender that you have other loans with. So that could be troublesome. Is this a big mortgage Lender like Wells Fargo or CountryWide?? Or a local bank??

Best to ask attnys in your area what they think. They will have probably have had dealings with this particular Lender before. Attnys would probably be better to advise you what to do in this particular situation.

I'm not sure the LOC increase will even be an issue. You've had that CC for years. The increase could have come from the Creditor. You didn't spend on it up to the limit. The purchases were smaller.

With the other loans, the CC and the personal loan, being held by the same Lender as your 2nd. And potentially having those loans "charged back" against your mortgage,........... Have you looked long and hard at the house?? Is it a definite, for sure that you have to keep the house?? Or can you possibly let the house go in BK and get a real "fresh start"?

Does it work financially for you to keep the house? Your post BK budget. Or could you possibly benefit better by moving on?