How long were you robbing Peter to pay Paul?

[deepin]

...source of creditor objections

Anyone have experience with this type of juggling being the source of creditor objections?

Assuming it all happened outside of the 70/90 window - I'm guessing it is simply up to the creditor to decide if it is worth their time. ?

[OregonMom]

We had been robbing Peter to pay Paul since 2003. Just kept thinking it will get better, never did until we filed and I can now pay all of my bills without having to wait until next paycheck to pay them.

[roozterdvx]

We weren't exactly "living above our means" before all of this. We don't have the biggest house on the block, newest technology at home, latest and greatest vehicles, etc...

My wife works in real estate and I work in commercial construction. We had decent income and were even putting money away in savings until her income dropped to nearly nothing. I was able to keep us afloat for a while with overtime but with the market and economy spiralling downward, my available OT dried up and we kept praying and hoping for a turn-around.
Well, after 2 years, our savings were completely exhausted, sold off everything we could in multiple yard sales, Craigslist, etc., and finally realized that we are so deep in the hole that filing ch7 was our only option.

We went through something similar early in our marriage. We married young and had kids right away. With my wife out of work and young mouths at home we got into a financial mess but I refused to give up. I worked and average of 70 hours per week, (I actually worked 3914 hours in 1 year during this time), and we managed to climb out of the hole we were in. It took 3+ years to get to a break even point and start putting away money. All in all, I put in over 7 years of "crazy" hours, (even had some nights I didn't even come home to sleep).

I have always been a "proud" individual and have always worked to pay my debts. I never thought I would be in a situation to file BK but such is life and I have to do what is best for me and my family. Those "younger years" went by and my kids grew up without dad because I was working all the time.

I can tell you that I know what it's like to eat toast at 4:30am and not eat again until getting home at 8:30pm just to save every cent I could. Our family has had dinners consisting of cereal and I've had saltine crackers with peanut butter.
That's what finally convinced me to consider ch7...my wife saw it coming long before I did.

[justbroke]

Robbing Peter? I was robbing Peter, his wife, Matthew, Mark, Luke, John, the Romans, the Ephesians... all of them. I would have rolled Donald Trump too, if I could have! LOL

Actually, probably about 12 months all to support my rental property since I had no income from that place and it had a negative cash flow of about $1750 a month (PITI). That can be very draining.

[deepin]

So it seems that many of us here have 'robbed peter ...' in one way or another (balance transfers, cash advances, using cards to pay the bills) for extended periods of time ...

It seems that this would make more people 'ripe' for creditor objections/aps -- is this not the case?

[justbroke]

It seems that this would make more people 'ripe' for creditor objections/aps -- is this not the case?

Absolutely not! The only way a creditor can object is on grounds which are allowed for such objection. (Well, let me correct myself. They can object to anything on any basis, but the only valid basis would be under 11 USC 523, or some bad faith objection.)

Generally, only fraud or "presumed to be non-dischargeable" under 11 USC 523 (Exceptions to Discharge). Proving fraud can be difficult unless there is glaring evidence that you outright committed fraud. While this may seem easy, because you "lied" on an application, or that you provided false information, a lender still has a fiduciary obligation to verify what you claimed is true. Case in point... "no documentation, income only loans". Even more specific... 11 USC 523(a)(3) states that a mere mis-truth about your financial condition, is not grounds. This tends to indicate -- tell me -- that the financial institution should have done its homework by performing a consumer credit report and validated income and employment! So, the creditors lack of due diligence, is their fault!

There is nowhere in 11 USC 523 (other than the "presumed non-dischargeability" provided for by 523(a)(3)(C)) that lists any particular time period for having made charges or used credit.

[deepin]

Am I wrong in thinking that a creditor can object on the grounds that if you were insolvent at the time you incured the debt (transfered a balance, got a cash advance ... to cover payments on another card) - it can then be inferred that you had no intention or means to repay that debt.

That debt is therefore non-dischargeable.

???

[justbroke]

Am I wrong in thinking that a creditor can object on the grounds that if you were insolvent at the time you incured the debt (transfered a balance, got a cash advance ... to cover payments on another card) - it can then be inferred that you had no intention or means to repay that debt.

That debt is therefore non-dischargeable.

???

No, you are not wrong. You cannot honestly be "insolvent" (know you are involvent) and continue to incur new debt. However, there is nothing in 11 USC 523 (Exceptions to Discharge) that assume you were insolvent outside of the 90 days before filing. The Bankruptcy Code does make an presumption that you are indeed insolvent 90 days before filing, but goes no further.

A creditor would need to prove that you were insolvent. This can be very difficult to prove. If you looked at my net worth at the time, even with the debt load, I had $80K in positive net worth (not negative). Therefore, I was not insolvent at the time I ran up my debt, and had the income to back it up. (American Express even had me do a 4506-T so they could see my IRS returns!)

Insolvency is not defined as more money going out than coming in.

The IRS defines insolvency as the excess of liabilities over the fair market value of assets. At the time I was "robbing peter" I wasn't insolvent! You may find that you were not insolvent either. So, a creditor would need to prove that you were insolvent at the time you incurred new debt.

Adversary Proceedings are miniature lawsuits. While inside the Bankruptcy process, they are no joke and have all the trimmings of a full blown legal proceeding!

This is no small undertaking, and filing an AP in Bankruptcy seems to costs no less than $4K, and I've seen the attorney fees go up to $200K!!! Compound this, that if the creditor loses the AP, the debtor almost certainly will ask for his fees to be covered by the creditor. This makes the likelihood that a creditor will file an AP for mere "insolvency" less likely. Even if the creditor thinks there is fraud, they tread very lightly if the debt is under $4K as their liability from losing, will certainly surpass the debt itself.

Here's a Cite... General Elec. Capital Corp. v. Janecek, 183 B.R. 571, 575 (Bankr. D. Neb. 1995) (insolvency can be considered, but is not determinative in assessing debtor's intent to deceive).

I also like this one... where the Debtor ran up charges knowing that they could never, in their lifetime, pay them back... Southtrust Bank of Alabama v. Moody, 203 B.R. 771 (Bankr. M.D. Fla. 1996) ("It should not take a rocket scientist to figure out that even if [debtor] lived 1000 years she would still not be able to repay the charges she ran up on her credit cards"),

But then, they say this... Household Card Servs./VISA v. Vermillion, 136 B.R. 225, 226 (Bankr. W.D. Mo. 1992). Cf. Stewart, 91 B.R. at 495 (insolvency alone does not establish intent to deceive); AT & T Universal Card Servs. v. Alvi (In re Alvi), 191 B.R. 724, 733 (Bankr. N.D. Ill. 1996); AT & T Universal Card Servs. Corp. v. Chinchilla, 202 B.R. 1010, 1016 (Bankr. S.D. Fla. 1996) (lack of ability to pay is insufficient basis on which to infer intent to deceive)

For those who like to read and do case studies, the National Review has an awesome review of dischargeability of credit card debt. While I posted some of their references above, I didn't find this article until after I wrote this post, but I find it very valuable information for those looking at dischargeability issues. It's a lot of reading, and I only suggest it for those looking at this issue specifically.

http://govinfo.library.unt.edu/nbrc/report/07consum.html#N_429_

[Flamingo]

Robbing peter to pay paul means balance transfers right? I just heard about this saying today - I saw a little video online about it.

For me, just the last year, I never thought it was a good idea before that and I didn't understand how they work and figured I didn't need to do them and I mostly did it to stretch out what cash I had left as long as I could in hopes I would have a job soon. But that didn't happen and soon, there was no space on the cards I was doing transfers to and Chase wouldn't let me do them anymore (all the transfers were from my Citibank card when those a-holes jacked my rates up -my biggest card). Before last year, I only had one card so no where to balance transfer too and I didn't know that when you did a balance transfer that was counted as a payment on the card - I gotta admit I liked that idea. Of course it wasn't getting me anywhere payments wise. I just owed that same amount on a different card. But it was something temporary I was doing until I had more cash - I wasn't wanting it to be a permanent thing.

So, now no more cash left and here I am. "sigh"

There are various ways to rob Peter, pay Paul, Rob Paul and pay Peter. Not just balance transfers - ATM withdrawals (most CC's come with pins for cash withdrawals from that ATM machine!) or utilizing the checks sent with the CC account. When the event hits that causes the "robbing" procedures due to lack of funds to pay bills, the usual "robbing" scenario from "Peter" (i.e. Chase) is to take the cash advance or account check and deposit it. Then write a check to pay Paul, Mary, etc. (i.e. Citibank, Bank of America, etc.) When Paul, Mary, etc. are due, you take the cash or write the check from Paul, Mary, etc. to Peter. It's an ongoing, monthly process. If you do it for several months, the cash advance fees and interest charges really rack up. It is one thing we will never ever do again but we did it thinking we could hold off filing and it would give us time for hubby to find that job that just would not materialize at even close to his former salary.

The best advice anyone can give as to this scenario is don't do it. Nothing lasts forever and this entire scenario never has a good ending unless accounts are closed and paid off during a period of many years since it's obvious the person(s) doing this cannot afford to make the payments in the first place.

[deepin]

justbroke --

Is it fair to say that in your opinion those most at risk of objections/aps would be those who were likely insolvent but continued to 'play the game' waiting for something to change - ringng up large balances - and those folks should be prepared to settle ?

[justbroke]

justbroke --

Is it fair to say that in your opinion those most at risk of objections/aps would be those who were likely insolvent but continued to 'play the game' waiting for something to change - ringng up large balances - and those folks should be prepared to settle ?

Sometimes I talk to much, and my point gets lost. (Generally, I try to backup what I'm saying with gobs of supporting documentation, cites.)

I'm saying that those at risk are the following;

• those running up balances within 90 days of filing
• those with large balance transfers within 90 days of filing
• those who committed fraud
• those who used credit to pay non-dischargeable debt (taxes, education, etc)

[deepin]

My assumption had been that many people in this situation (robbing peter to pay paul) and were in-deed insolvent and are therefore at a greater risk of facing an objection ...

...thus, my surprise that I can't find more like examples of these types of APs or case law pertaining to this. Perhaps, this is just an indication that most of these folks 'read the writing on the wall' and decide to settle before it gets to that point.

[justbroke]

...thus, my surprise that I can't find more like examples of these types of APs or case law pertaining to this. Perhaps, this is just an indication that most of these folks 'read the writing on the wall' and decide to settle before it gets to that point.

I don't think what you wrote is the case, and I believe you're reading too much into this whole "exception to discharge", "insolvency", and "fraud" thing.

In probably 98% of the cases, the creditors don't file APs on mundane and small things. Adversary Proceedings (AP) are costly and being able to even recover your costs or having brought about a complaint (AP) are not likely to be recovered... especially if the creditors credit agreement doesn't allow or provide for those types of costs in the agreement.

Suffice it to say, that it doesn't happen as often as you think it does. Usually, by the time a person is in Bankruptcy, the debt has been sold, and a JDB is certainly not in any position to fight. Having wrote that, I have seen JDB buyers like eCast Settlement enter into some APs where there was some good money on the table.