opinions on lots of cash advances

[texas99]

heres my story.. i was a stock trader the last few years. i did real well with a stock in early o7 and was up a lot of money. i paid off all my credit cards to zero.. about 2 weeks after i paid them off my stock went down sharply and unexpectedly. i thought it was a temporary dip so i went to the bank and took out 50k in cash advances to pay off my margin account. . i thought this would be for maybe 2 weeks or so till the stock went back up and i could pay the cards off again. needless to say the stock dropped and dropped and i got totally wiped out. i dont own any real estate or have any assets. i am now out of a job as i dont have any money to play the market.. i have to get a job. i have an attorney and i am going bk in jan.

here is the question. my attorney thinks the cash advances may be a problem... i took them out 6 months ago and i have paid more than the minimum on them for the last 6 months. i had no intention of declaring bk ...

also my income for the year was in the negative due to my losses ...so no need for the means test

anybody have experience with large cash advances ( 50k or more) 6 months before their bk and what happened

[danaf]

Can you wait longer before filing?

I haven't seen anyone on the board with that high of cash advances in such a short time. 20-25k maybe. The general consensus has been the longer you wait it out, the better. In your case - probably a year would be better than 6 mos post advances.

[danaf]

also - right now sounds like you are judgement proof. And even when you do get a job - it will take them a while to figure that out.

[HHM]

Yes, that is a fairly unique situation and the amount is significant but its not exactly clear under which provision of the BK code they would have the debt declared non-dischargeable. After all, it's no secret what margin accounts are used for...speculation.

I would imagine that the creditor will do some saber rattling and at least investigate an objection. and there may be some technical provision buried within the BK code that deals with this.

The next question...is this your only unsecured debt...or are their others? Also, are you simply a trader on your own account, or are you a broker.

[Bandit]

took out 50k in cash advances to pay off my margin account

Just in case someone does go asking to verify, make sure you can show that is what you did with it all. That would be better than just blowing it or having no way to show what you did with it.

Is it all from one line of credit? & all at the same time? or from different banks & different times?

[texas99]

i am not a broker. just alone

the only other debt is a car i have to turn in

[Bandit]

Yes, that is a fairly unique situation and the amount is significant but its not exactly clear under which provision of the BK code they would have the debt declared non-dischargeable. After all, it's no secret what margin accounts are used for...speculation.

I was thinking the same things but was not sure how to put it down. My first thought was black jack & horse racing but it is not the same.

[texas99]

it is all totally tracable

electronic transfers from my checking account into my brokerage account

not hiding anything ,there is a clear paper trail

my lawyer said it is best to file now while i am unemployed

[Bandit]

In your case - probably a year would be better than 6 mos post advances.

Yah. I feel it is A-Typical when we first realize what has happened to want to dive in immediately & get it done & over with. When we look at it more objectively we can usually hold out longer than we realize.

[Bandit]

my lawyer said it is best to file now while i am unemployed

He does have a good point & I can't argue with that! LOL

I keep looking at my situation & realize that all I need to do is get laid off for awhile & POOF, my BK will go like magic.

[HHM]

After doing a little searching...if there is going to be an issue, it is going to arise out of the "fine print" of the margin account agreement. I suggest you get a copy of the FULL agreement and get it to your attorney. If, in the course of your trading, you violated any rule of the Exchanges, the SEC, Fed. Reserve, etc, that could be used as grounds to deny discharge. And since your not a professional broker, you may not realize you violated some of these rules. My guess is, based on what you described, you may have violated your margin maintenance requirements.

In any event, the issue you may have is not going to come out of the BK law, its going to come out of the Margin Agreement and the various Exchange rules, SEC rules, and Fed Reserve Rules, and it won't matter how long you wait to file BK.

[texas99]

i always followed the margin requirements ...

also i am not going bk with any brokeridge.. my stock account is closed and i am not in any debt with them

i told my attorney the whole story from the start

[HHM]

Opps, I re-read your post...you used your CREDIT CARDS, using cash advances, to pay back you margin account, my bad.

Ok, then you are probably going to be ok, as the normal rules for Credit Card Purchases apply. I think if you can wait a little longer, the better off you would be.

[texas99]

also... before i did the cash advances. i had regular charges totaling about 50k

then when i did well in the market, i paid off the credit card debt

then the market went bad and i took out cash advance

had i not paid them all off 2 weeks before the cash advances , i would be going bk for the same amount , just all normal credit card debt and not cash advances

[Bandit]

so you were always carrying some kind of debt, then paying it back at once. That is a good thing too.

They do view swiping the card different from cash advances but the way it happened for you is actually very normal because the whole sob story makes perfect sense why you did what you did.

If you are totally comfortable & confident with your attorney & you both agree on things, Based on the facts given, I bet you come out of this just fine.

You are like between point a & b. You need a job but you can't really wait six more months before filing, then seek income. That is a tough one. I don't know what I would do but being suspended like that would make me crazy.