BIG CC balance and BIG balance tfrs - I would really appreciate some advice!

[FLLori]

Hi - I am new here and have been pouring over the boards - trying to absorb as much information as I can. I would like any help or advice anyone can provide regarding my specific situation.

I am considering filing bankruptcy and I have had one consultation (I didn't feel right about the attorney) and I have another scheduled - but they couldn't get me in until May 12th! I am going to call a few other attorneys to see if I can get in sooner.

So, before then I have a few questions. The three years since my divorce have been quite difficult and I have gotten myself into BIG trouble with credit card debt. I have moved three times, including a huge move from CO to FL. So, I currently owe approximately $59,000 on credit cards. Trust me, I know I made some very bad decisions and no one can say anything worse to me than what I say to myself every day. However, I am and have been current on all cards.

On 4.20.08, I decided that I will no longer use my credit cards. I know it's only been 5 days, but I haven't used them and I won't use them again from this point forward. I have been crunching the numbers and I just do not have the funds to pay even the minimum payments on the cards. That was my problem before - I was using my cards when I ran short on money because I was paying a huge amount each month in minimum payments.

Before a week ago, I had honestly not even considered bankruptcy as an option. I was using my cards frequently and transferring balances from one card to another to take advantage of low interest rates. A few such transfers are what I think may get me into trouble if I file. I transferred approximately $3000 in Dec 2007 and $11000 in March 2008 to pay off debts that my sister had in order to help her with her interest rate. On the $11,000 debt, she was making a $230.00 payment per month and only $7 was going to principal because of her interest rate. I had a card with a zero balance and a good balance transfer offer, so I transferred the money to her account and assumed her debt. She was to make payments to me each month to pay off the card. We have made regular payments since December - totaling $1500. She has now informed me that it may be difficult or impossible for her to pay me each month. So, now I have this additional debt that is impossible for me to pay.

I also have some balance transfers that I completed in Oct/Nov 2007 that total approx $5000 on one card and $12000 on another card. I didn't realize they were such high amounts and so recent until I actually researched the transactions this past week. I have also been making regular payments on those for the past 5 (Oct) / 4 (Nov) months.

I have determined that I qualify under the means test and I can list my expenses to leave me with little to no disposable income for Schedule J.

I am worried about the balance transfers being considered abuse. Will the $11,000 debt be a problem because I paid off my sister's debt with it? I did not transfer the balances in anticipation of anything. I simply did it to consolidate my debt (for my transfers) and get a better interest rate (for her transfer).

How long should I wait before I file and should I make minimum payments until then? I have seen conflicting information re: this and I thought I may have special circumstances because of the large balances.

Sorry this is so long. Any help/advice you can provide would be greatly appreciated!

[HHM]

Your instinct is correct, the recent $11K is your biggest problem. You must wait AT LEAST 90 days from the date you made that transfer before filing, so you cannot file until at least end of June.

However, given the amount involved, you should probably wait until the December/January before you actually file BK. Reason being, it sounds like you are (and have been) mostly insolvent for some time, and the use of the card (paying off someone else's debt) does not look good if you file BK in the near future.

Best advice. 1. (which you already are doing), stop using your credit cards). 2. Continue to make the minimum payments on any large balance transfers, cash advances, or charges that you have made in 2008. 3. For any large balance, I would continue to make the payments for at least 6 months before you stop, and for the recent $11,000K you need to make the minimum payments.

[FLLori]

HHM - thanks and a couple more questions

HHM - thank you for the info. I have read many of your posts and was hoping that you would answer my questions. You really seem to know what you're talking about and you stick to the facts and don't try to make people feel worse than they already do - so thanks!

The only transfer I have made in 2008 is the $11,000 transfer to one particular card. Should I also continue to pay the minimum on the other cards through at least the 6 month mark?

Is it better to be current on your payments when you file bankruptcy? Will being current on the large one and behind on the others raise a red flag? If I stop paying the other cards and wait at least 6 months, what kind of legal action may take place during that time? Will there be wage garnishments, judgments, etc. in such a short amount of time?

Would paying the minimums on all of the cards be throwing money away?

I am concerned about the personal responsibility of paying my debts and that's why declaring bankruptcy has never been a consideration for me in the past. I am not trying to cheat anyone or do anything underhanded. I am just trying to figure a way out of this hole I have created for myself.

[HHM]

The only transfer I have made in 2008 is the $11,000 transfer to one particular card. Should I also continue to pay the minimum on the other cards through at least the 6 month mark?

I would. So, for example, any large charges made in December, I would keep paying on those accounts at least through the May payment cycle.

Is it better to be current on your payments when you file bankruptcy? Will being current on the large one and behind on the others raise a red flag? If I stop paying the other cards and wait at least 6 months, what kind of legal action may take place during that time? Will there be wage garnishments, judgments, etc. in such a short amount of time?

As far as the BK is concerned, it won't really matter when you stop making payments. However, as for your credit report, there is some evidence that if you remain current on all payments going into your BK, your credit will be marginally better coming out of BK. (but don't put too much weight on that fact, let your financial realities dictate whether you make payments or not). Also, I would not worry about making payments on some accounts and not others, that won't raise red flags. As for legal action in the interim, typically, you won't be sued within 6 months of first default, but it is "possible". More likely, you will simply have to deal with a flood of phone calls and letters.

The goal, at this point, is to maximize the benefit to YOU of the BK, i.e. to discharge all your unsecured debt with as few complications as possible. With many recent, large transactions, you are going to have tread some water (and stay afloat) for a while before you can file.

I suppose some preliminary questions are appropriate to fill in the picture a bit....

1. If you are able to make the minimums and otherwise pay your living expenses, that begs the question of whether you can qualify for a chapter 7. What is your monthly income?

2. Do you have any meaningful assets (or equity in any assets).

[FLLori]

Questions answered...

Thanks again HHM. As for the answers to your questions:

1. Per month - I make a gross of $3120 with a net of $2730. I also receive court ordered child support of $535 per month...for a total of $3265. We have a 2 person household - myself and my daughter. According to the docs that the first attorney gave me, the FL Median monthly income for a 2 person household is $4,102.

2. I have a car - 2002 Subaru Forester - that is paid for and I also have about $20,000 in 401(k)/Annuity/Pension accounts. Will I lose my car?

As far as making it through this period - I am just going to have to sell some of my "things" - books, DVD's, CD's - but I am not sure how much $ I can get for them. I could also sell my engagement/wedding ring as it is clear that it is of no use to me anymore. I also have a supportive family that will help me if I need groceries, clothes for my daughter, etc.

I really appreciate the advice you've given me to this point and I look forward to learning more from you. It is helping to make me see that this does not have to be the end of the world and I just need to have a solid plan for my financial future.

[AmyJ]

Hi. Your situation is similar to mine re divorce and moving, but I don't have a child. A 401K is protected. Check Florida exemptions, b/c a car has been my question. Mine is worth more than what is allowed.

I didn't do balance transfers, but i owe 12k on one card & i used that card alot in jan and feb. I also allowed a niece living w/ me PT to use cards on and off. I talked to an attorney after accepting the fact there's no way I can get out from under. Now I'm gathering all that's needed but also am finishing taxes and learning more.

I'm grateful that I also have a supportive family... You're smart to look toward the future.

[HHM]

The FL exemption for cars (as I recall) is crap, something like $1,000....so that could potentially be a problem. You won't "lose" the car, but you may have to pay the trustee the value of the non-exempt equity in the car as part of your BK.

[FreshLikeADaisy]

FLLori, I looked it over as you asked, and I think that HHM has given you sterling advice!

The thing about making the min pmts on the cash transfers has to do with avoiding a creditor objection to your bankruptcy, as opposed to the failure of the entire case. Basically, if you don't let these transactions age some while making some token payments, the creditor could come back and allege that you obtained this credit knowing that you were not going to pay. Not true, but expensive to fight. Letting them age is a great way to minimize the risk of a creditor objection. There is a sticky around here somewhere (also by HHM) that deals with creditor objections; look for that because it will tell you everything you need to know.

(Found 'em:

http://www.bkforum.com/showthread.php?t=20075

http://www.bkforum.com/showthread.php?t=20078)

Also, don't worry about making ALL your minimum payments: concentrate on the ones with the balance transfers and cash advances. Many, many people rob Peter to pay Paul before they finally file; HHM is right, some paid and some unpaid isn't the red flag in bk that you might think it is.

The other thing that occurred to me is your mention of a move from Colorado: how long ago was that? If you have lived in Florida less than two years, chances are VERY good that you will be required to file with Colorado exemptions (which are more generous than Florida's!!!) so that may help you as well. See my posts on the following thread for more information regarding what state's exemptions you use: http://www.bkforum.com/showthread.php?t=22054

However, I will offer this caveat: if waiting to file means you end up having to use FL exemptions, but your questionable transactions age beyong the point where a creditor believes he can successfully obtain an objection to your discharge, WAIT anyway. It's more important to get the debt off your back, and frankly, the exemptions may go up again in the time you wait.

In the meantime, learn all you can about bk (see my sig ) so that you walk into it very well prepared. You can plan for this; it doesn't have to broadside you. Good luck!!!

[FLLori]

Thanks

Many thanks to HHM and FreshLikeADaisy ~

I really appreciate the time you've taken to answer my questions.

I tried to make the numbers work to figure out how I could not file at all, but every month forward, my balance will creep lower and lower, taking into account only the most basic expenses. By March, 2009, I will literally have no money left. So...I am going to do my best to make minimum payments through December and then file. That will be 9 months of regular payments on the most recent debt and 13/14 months on the others. I just hope that is enough time for the debts to "age".

In the meantime, I am going to educate myself fully so that I can feel like I have some amount of control over what is happening.

This is a great site with some exceptional people helping others. Thanks again!

[JRScott]

When did you move?

If you moved less than two years ago you use CO exemptions not FL at least that is how I understand it.

Other than that the others seem to cover most things I thought of

[FLLori]

Timeline

Hi JR ~

Thanks for the input - I can use all of the knowledge and information that anyone cares to provide!

I arrived in FL on June 26, 2006. I have to wait until at least the end of June to file - and I will actually be waiting until at least December, so I will be using Florida's exemptions. My only worry as far as exemptions are concerned is my car. I need to consult with an attorney about how to best handle it.

[morallyBR2]

I'm in a simliar situation with the balance transfers myself. I transferred 4 cards to the amount of 13k on my citicard. I made one payment the following Jan (08) and couldn't swing it after that. What are my possible outcomes on this? i haven't filed yet, won't until the end of May/Early June maybe. Didn't mean to hijack your thread, but it's a good question. Any advice is appreciated!

[FreshLikeADaisy]

I arrived in FL on June 26, 2006. I have to wait until at least the end of June to file - and I will actually be waiting until at least December, so I will be using Florida's exemptions. My only worry as far as exemptions are concerned is my car. I need to consult with an attorney about how to best handle it.

Yep, you're stuck with FL exemptions. Sorry.

At this time, you have $1k in personal property, $1k motor vehicle, and $4k unused homestead (wildcard) exemptions to throw at your car's equity and other property. If you're not going to file until December and you're current on the loan, you're actually in a very good position to strategize on the car's equity... definitely see an atty now, even if you're not ready to file, because he/she may have some great ideas for you on how to keep the car if the equity exceeds what you can exempt. Even if you have to try to work out a buyback, you can at least plan for that now and not be broadsided when you file later. Good luck!!!