Extra money... prf. payment??

[ejny65]

Hi Everyone:
I have a question regarding paying minimum payments to CCs.
I am currentley waiting to be able to file in a few months. I own a business and my income has been a lot less lately. (it was more than median income before) anyways, during this period, There will be months that my houshold income is $400-$700 more than median, but some months it will be below median. I have $1600 +/- monthly minimum to CC. I am at least 1-2 months behind in payments. Now, when my monthly income is higher and I have money left in my account, should I pay anything to any of the CCs?? If yes, to which one, It wont be enough to divide among all of them. If not, should I let that money stay in my personal account? will this raise eyebrows or not? What is the best thing to do with that extra money? Also, I know they will do the average in last 6 months to see if my income was high or low, but at the end of each month, what to do with that money that has been left, that puzzles me. Can I say I was saving it for attorney fee? what should I do with it ???????

[phoenyx]

I highly recommend speaking to at least one bankruptcy attorney. Many of them will offer their initial consultation without charge. I'm sure they will be glad to recommend how to plan for paying their fees.

If you file Chapter 7, assets that you have including cash in or out of a bank account would usually be taken by the bankruptcy trustee -- unless you can exempt those assets. Each state has different rules on what can be exempted, and to what limits. Since you know in advance that you're filing, you're legally allowed to do some bankruptcy planning with cash that you have, which a bankruptcy attorney can help you with.

I'm not an attorney, and probably have less experience than many other posters on this board. My situation might be vastly different than yours, hence my strong recommendation to speak to a bankruptcy attorney.

I'm filing Chapter 7, and my bankruptcy attorney told me that since I was committed to filing, stop paying my creditors completely. All of my creditors are for unsecured creditcards and loans. If I owed any creditors for secured assets like a house or car, his advice very well might have been very different.

I ignored the minimum payment amounts and just took the additional penalties. If the debt's going to be wiped out, why give them money that you desparately could use? I'm sure if it's debt that won't be wiped out for various reasons, there might be better solutions.

[ejny65]

Is it ok to pay the extra money to car loan that I am planning to keep? ( I am paying minimum on that, so can I pay more than minimum if I want to keep the car?)

[NoName]

Is it ok to pay the extra money to car loan that I am planning to keep? ( I am paying minimum on that, so can I pay more than minimum if I want to keep the car?)

Probably not. The trustee may see that as a preferential payment.

[woeisme]

If you have extra $ one month, but are short the next, you can use that $ to cover bills that come up in the lean month. Check out what your state allows you to exempt. If you're lucky, you'll be in a generous state and the amount of money we're talking about will be exempt anyhow. And definitely start saving it for the lawyer fees, that's a legitimate expense. Pay on your secured assets that you want to keep in BK, stop paying on all the unsecured CC debt unless it's really "fresh" purchases that you just made. (It should go without saying that you need to stop making fresh CC purchases, if you haven't already.) I wouldn't pre-pay the car because then it may be an asset that is no longer completely exempt. Do you pay your insurance monthly, or can you pay it for 6 months, or even a year in advance? How about other legitimate expenses, like dental, medical, etc. that you have been putting off because you don't have the $? You could spend the $ there.

[butterflywings]

I would say this all depends on your last c.c usage. If you have used the cards recently or in the last 3 months I would make a few months payments to show good faith.

Lessening the chances of a creditor's objection is not only about length of time since c.c usage, but about showing good faith payments towards the debt. Creditors can object after the 90 day period if they can prove the debtor knew they were not able to repay charges at the time they made them, and it would be quite easily to do if the debtor makes charges and then doesn't make any payments or may make only payment.

I am filing in March and I am still making minimums because my last c.c usage was in October. It's all in how much someone worries about creditor's objections and how badly you want to show good faith. Weigh your priorities and you'll find your answer there.