Cash Advances and losing on stocks/options

[bkincali]

I know this was addressed before on a different thread but I'm wondering if anyone had any follow up or other advice.

Last year, starting in June 2008 and ending in October 2008, I took out several large cash advances after taking heavy loses in the stock market. I put that money to work in the market in the attempt to pay off that debt and the debt I had prior, which was almost completely paid off. Needless to say, I lost most of it when the market really tanked starting in the summer of 08. I made payments on those advances for 3 to 7 months and then in January my promo rates expired and I was broke. I've been unemployed for a long time now and am filing a Chapter 7 without a lawyer, since I have virtually no assets and have gone through the legal forms thoroughly.

I'm very worried that it's gonna be the final bad straw for me here and the trustee is going to recommend not allowing the discharge because of where the money went. Mind you, I've had credit card debt for 20 years and all the $110K I owe is not from this event, but it's a large portion of it.

I did meet with a BK lawyer but didn't discuss this issue. He acted as if there would be no problem in the BK seeing as when I borrowed the money and when I am filing the case.....

Help! How do I address this if asked during the meeting of creditors by the trustee and minimize the chance of something adverse happening???

[backtoschool]

I know this was addressed before on a different thread but I'm wondering if anyone had any follow up or other advice.

Last year, starting in June 2008 and ending in October 2008, I took out several large cash advances after taking heavy loses in the stock market. I put that money to work in the market in the attempt to pay off that debt and the debt I had prior, which was almost completely paid off. Needless to say, I lost most of it when the market really tanked starting in the summer of 08. I made payments on those advances for 3 to 7 months and then in January my promo rates expired and I was broke. I've been unemployed for a long time now and am filing a Chapter 7 without a lawyer, since I have virtually no assets and have gone through the legal forms thoroughly.

I'm very worried that it's gonna be the final bad straw for me here and the trustee is going to recommend not allowing the discharge because of where the money went. Mind you, I've had credit card debt for 20 years and all the $110K I owe is not from this event, but it's a large portion of it.

I did meet with a BK lawyer but didn't discuss this issue. He acted as if there would be no problem in the BK seeing as when I borrowed the money and when I am filing the case.....

Help! How do I address this if asked during the meeting of creditors by the trustee and minimize the chance of something adverse happening???

The timing of the advances is fine, as long as you file after October to give the advances a year to have aged.

I have a couple of questions though in order to answer your questions

1. How large were the advances?

2. Did you sell the stock? When did you sell the stock, and are you planning on counting the sale of the stock as income?

3. Will the "income" of selling the stock put you over the median for last year?

These are the types of things that the trustee will be looking at.

[bkincali]

The timing of the advances is fine, as long as you file after October to give the advances a year to have aged.

I have a couple of questions though in order to answer your questions

1. How large were the advances?

2. Did you sell the stock? When did you sell the stock, and are you planning on counting the sale of the stock as income?

3. Will the "income" of selling the stock put you over the median for last year?

These are the types of things that the trustee will be looking at.

Thanks for the speedy reply.
I actually was going to file very soon but I probably should wait until the end of Oct.

The advances were as follows:

20K in June 08 (Chase)
5.5K also in June (BofA)
15K sometime around Sept (citbank)
26K in July 08 (BofA)
5K in Sep 08 (Chase)
14K on three different cards in Sep and Oct.

There were several small ones after Oct. $850, $700, and one for $400 (in Feb 09 actually.)

These were not stocks... I bought exclusively OPTIONS which I took very heavy losses on until I was basically busted out. Unfortunately, I did not write those off on my taxes because I had no tax burden in 2008. (I did have residual income from commercials I did early in 2008 but not enough to owe money to uncle sam) It's very complicated because you have to register as a "mark to market" trader the year prior, it's a real mess.

I'm definitely NOT over the median income. I'm below poverty I think at $13k last year.

Thanks very much for any insight

[bkincali]

oh one more thing

I should also note that not all these transfers were actually cash, there were balance transfers that I used... I'm glad I wrote this because I need to figure out which of those were balance transfers and which were actual advances!

[backtoschool]

Thanks for the speedy reply.
I actually was going to file very soon but I probably should wait until the end of Oct.

The advances were as follows:

20K in June 08 (Chase)
5.5K also in June (BofA)
15K sometime around Sept (citbank)
26K in July 08 (BofA)
5K in Sep 08 (Chase)
14K on three different cards in Sep and Oct.

There were several small ones after Oct. $850, $700, and one for $400 (in Feb 09 actually.)

These were not stocks... I bought exclusively OPTIONS which I took very heavy losses on until I was basically busted out. Unfortunately, I did not write those off on my taxes because I had no tax burden in 2008. (I did have residual income from commercials I did early in 2008 but not enough to owe money to uncle sam) It's very complicated because you have to register as a "mark to market" trader the year prior, it's a real mess.

I'm definitely NOT over the median income. I'm below poverty I think at $13k last year.

Thanks very much for any insight

Well, the advances are large, but if you wait the year I don't see an issue with the trustee in relation to the advances. Your creditors might object to the advances though and you might have to go through an adversarial proceeding which is an expensive additional trial. The key here your income when you took the advances. If the credit card company can prove that you were already insolvent when you took the advances then they might try to keep those individual advances from being discharged.

What is in your favor is that a year has passed between you taking the advances and filing bankruptcy. What is also in your favor is that you made payments on the advances. I think the fact that a year passed and that you made payments should keep you from ending up in an AP.

Time is your best friend in this scenario. The more time you can put between your filing and the advances the better. Definitely wait until the end of October to officially file if you can.

[bkincali]

Well, the advances are large, but if you wait the year I don't see an issue with the trustee in relation to the advances. Your creditors might object to the advances though and you might have to go through an adversarial proceeding which is an expensive additional trial. The key here your income when you took the advances. If the credit card company can prove that you were already insolvent when you took the advances then they might try to keep those individual advances from being discharged.

What is in your favor is that a year has passed between you taking the advances and filing bankruptcy. What is also in your favor is that you made payments on the advances. I think the fact that a year passed and that you made payments should keep you from ending up in an AP.

Time is your best friend in this scenario. The more time you can put between your filing and the advances the better. Definitely wait until the end of October to officially file if you can.

What about the fact that most of these cards have already "charged off" these accounts and closed them. I've received a couple of little colored letters from their collector friends etc. What are the chances a debt collector will file an objection or can they even do that? Thanks again, I'm really stressin' about this and I do appreciate your advice and insight.

[backtoschool]

What about the fact that most of these cards have already "charged off" these accounts and closed them. I've received a couple of little colored letters from their collector friends etc. What are the chances a debt collector will file an objection or can they even do that? Thanks again, I'm really stressin' about this and I do appreciate your advice and insight.

The creditors can still object, but most likely won't if you let as much time as possible pass between the advances and filing (at least a year).

[keepmine]

If you're unemployed and broke-why are you even filing at this time?
You're better off putting a lot more time between these events and concentrate on finding a job. You need to be able to support yourself post bk.

[AngelinaCatHub]

If you're unemployed and broke-why are you even filing at this time?
You're better off putting a lot more time between these events and concentrate on finding a job. You need to be able to support yourself post bk.

I agree with "Keepmine". That is, unless you get a summons to answer a suit. Attempt to avoid any Judgments. BK if you are about to get one, so I would put my efforts in getting work then keep your records current if you have to file. Have your filing fee put aside. A Judgment is extra trouble to get removed.

At this time, you are collection proof. When you get work, they have to get a Judgment before they can hit your wages, that is the time to file. Time is your friend for now. 'Hub

[whipster1]

Keep copies of all your brokerage statements. My trustee wanted statements for the year prior to filing. If you mark to market can't you take the full loss that year instead of having to carry over year to year? You should amend to show the full losses or your situation is hard to understand for anyone who doesn't trade stocks or options.

[slam22]

All of our mentors are correct. Focus on finding employment. When you are on your feet again save up enough cash so that you can hire an attorney. In your case with the issues that you have described I think it would be foolish to file Pro Se.

[jribe]

i believe another problem is that the CC's can argue that you were insolvent at the time you took the cash advances; thus knew you wouldn't be able to pay them back. If your income was only 13k - and you took out nearly 90k in cash advances within 6 months that will certainly be flagged. I don't really see how it would not be?

Are you an industry professional? Or a "day trader"?

The Sept/Oct are also suspect because of the market at the time you took those. It was pretty clear the market was going nowhere but down- this was right around the time Lehman, Merrill, AIG and many others were going under. The market was in a downward spiral.

I didn't catch if you made payments on any of these cards? The only way you may possibly avoid an abuse charge is if you make 6 months or more of payments. Otherwise- i would start saving for a really good BK lawyer.

From what you presented i don't think any of the companies would have a hard time proving abuse. The "time" doesn't always make things go away. The trustee will see your tax returns from last year making 13k and most likely bring up this situation.

Good luck to you though

Thanks for the speedy reply.
I actually was going to file very soon but I probably should wait until the end of Oct.

The advances were as follows:

20K in June 08 (Chase)
5.5K also in June (BofA)
15K sometime around Sept (citbank)
26K in July 08 (BofA)
5K in Sep 08 (Chase)
14K on three different cards in Sep and Oct.

There were several small ones after Oct. $850, $700, and one for $400 (in Feb 09 actually.)

These were not stocks... I bought exclusively OPTIONS which I took very heavy losses on until I was basically busted out. Unfortunately, I did not write those off on my taxes because I had no tax burden in 2008. (I did have residual income from commercials I did early in 2008 but not enough to owe money to uncle sam) It's very complicated because you have to register as a "mark to market" trader the year prior, it's a real mess.

I'm definitely NOT over the median income. I'm below poverty I think at $13k last year.

Thanks very much for any insight

[SANDY075]

I just wanna share my experience before I filed for BK CH7. Around August 2008, I did a balance transfer from one Credit card to another 'coz of the zero interest rate being offered. I did make minimum payments on time since I had to budget everything in order to make all credit card payments and avoid late fees. However, December 2008 I started worrying about all the expenses since the stock market were down and credit card zero rate is almost over and the worst was I had to get a cash advance from the credit card to cover the mortgage payment I had for that month. I decided to consult a lawyer Feb 2009 and the lawyer asked me right away if I had made any cash advances or balance transfers for the past 3 months. When I said yes, he just told me that to stop making all payments and just tell creditors to contact my lawyer. We finalized everything and April 2009 when I filed for CH7.Everything went smoothly at my 341 meeting and got discharged last August.
Just like the rest of the contributors, I suggest that you get a good BK lawyer to handle everything and make sure that you tell the lawyer everything regarding your situation.

I know this was addressed before on a different thread but I'm wondering if anyone had any follow up or other advice.

Last year, starting in June 2008 and ending in October 2008, I took out several large cash advances after taking heavy loses in the stock market. I put that money to work in the market in the attempt to pay off that debt and the debt I had prior, which was almost completely paid off. Needless to say, I lost most of it when the market really tanked starting in the summer of 08. I made payments on those advances for 3 to 7 months and then in January my promo rates expired and I was broke. I've been unemployed for a long time now and am filing a Chapter 7 without a lawyer, since I have virtually no assets and have gone through the legal forms thoroughly.

I'm very worried that it's gonna be the final bad straw for me here and the trustee is going to recommend not allowing the discharge because of where the money went. Mind you, I've had credit card debt for 20 years and all the $110K I owe is not from this event, but it's a large portion of it.

I did meet with a BK lawyer but didn't discuss this issue. He acted as if there would be no problem in the BK seeing as when I borrowed the money and when I am filing the case.....

Help! How do I address this if asked during the meeting of creditors by the trustee and minimize the chance of something adverse happening???

[bkincali]

i believe another problem is that the CC's can argue that you were insolvent at the time you took the cash advances; thus knew you wouldn't be able to pay them back. If your income was only 13k - and you took out nearly 90k in cash advances within 6 months that will certainly be flagged. I don't really see how it would not be?

Are you an industry professional? Or a "day trader"?

The Sept/Oct are also suspect because of the market at the time you took those. It was pretty clear the market was going nowhere but down- this was right around the time Lehman, Merrill, AIG and many others were going under. The market was in a downward spiral.

I didn't catch if you made payments on any of these cards? The only way you may possibly avoid an abuse charge is if you make 6 months or more of payments. Otherwise- i would start saving for a really good BK lawyer.

From what you presented i don't think any of the companies would have a hard time proving abuse. The "time" doesn't always make things go away. The trustee will see your tax returns from last year making 13k and most likely bring up this situation.

Good luck to you though

These were not new cards that I suddenly had balances on. I was carrying balances for years and as I'm filling out the BK paperwork it asks me the timeframe that I incurred these debts which is the entire life of the card. How does the trustee even know when the majority of the debt was incurred? Or is it the CC companies that will bring that to the table if they raise objection?

I was "day trading", not a professional trader and not set as "mark to market" with the IRS. Someone said I should amend my return which is an excellent point and I should do that just so that stuff is on the return but I cannot write off the full amount unless I had already stated "mark to market" trader in early 2008, which I did not do. I will amend that return before I file though, I should have included it in my taxes... that was one more stupid thing I did.

The CC's can argue that I was insolvent but I have statements, prior to losing 50K in one trade in June, of very large payments from my earnings in the market, that were paying my cards down to zero, which is why they were increasing my available credit without me applying for it.

I DID make large payments on these cards from (Jun 08 thru Jan 09)

Don't they have to "prove" I had intent on not paying it back or is there just an "abuse" clause that states I had no business doing what I did? And I must then show that there was intent to pay them back??? This is the crux of the situation I guess. It's a good point you make.

The Sept/Oct timeframe in the market WAS an obvious disaster, but most the losses I incurred were before that, in Oct I was buying puts on the market betting it would go down further, while our government was propping up the stock market week to week with rhetoric and "programs" to keep the system from collapsing, hence, I incurred more losses.

I guess the issue really at this point is... how do I avoid the worst case scenario and what is that scenario? One of the reasons I'm filing this Pro Se is that even if I file through an attorney, if there is an objection that attorney will not represent me through that legal proceeding, so that $2K will be wasted. The other issue raised here is why don't i get a job... I'm afraid to start making any real money because I'm afraid that may cause me to not qualify for a chap 7.

Thank you all so much for your input, this is a great forum.

[backtoschool]

These were not new cards that I suddenly had balances on. I was carrying balances for years and as I'm filling out the BK paperwork it asks me the timeframe that I incurred these debts which is the entire life of the card. How does the trustee even know when the majority of the debt was incurred? Or is it the CC companies that will bring that to the table if they raise objection?

I was "day trading", not a professional trader and not set as "mark to market" with the IRS. Someone said I should amend my return which is an excellent point and I should do that just so that stuff is on the return but I cannot write off the full amount unless I had already stated "mark to market" trader in early 2008, which I did not do. I will amend that return before I file though, I should have included it in my taxes... that was one more stupid thing I did.

The CC's can argue that I was insolvent but I have statements, prior to losing 50K in one trade in June, of very large payments from my earnings in the market, that were paying my cards down to zero, which is why they were increasing my available credit without me applying for it.

I DID make large payments on these cards from (Jun 08 thru Jan 09)

Don't they have to "prove" I had intent on not paying it back or is there just an "abuse" clause that states I had no business doing what I did? And I must then show that there was intent to pay them back??? This is the crux of the situation I guess. It's a good point you make.

The Sept/Oct timeframe in the market WAS an obvious disaster, but most the losses I incurred were before that, in Oct I was buying puts on the market betting it would go down further, while our government was propping up the stock market week to week with rhetoric and "programs" to keep the system from collapsing, hence, I incurred more losses.

I guess the issue really at this point is... how do I avoid the worst case scenario and what is that scenario? One of the reasons I'm filing this Pro Se is that even if I file through an attorney, if there is an objection that attorney will not represent me through that legal proceeding, so that $2K will be wasted. The other issue raised here is why don't i get a job... I'm afraid to start making any real money because I'm afraid that may cause me to not qualify for a chap 7.

Thank you all so much for your input, this is a great forum.

I definitely think you should amend your return. The trustees look closely at your last years return or in some districts your last two years. (I had to show two years of tax returns). Having the losses on the returns will help the trustee understand your overall case.

The credit card companies can dispute the individual charges in an AP and try to keep them from being discharged. In your situation, it is the later charges, the ones that happened in fall of '08 that am worried about. At that point you had already incurred large losses, and the credit card companies can say that you knew you were insolvent when you took those advances. I am not as worried about the balance transfers, as you can argue there that you were trying to save money by getting a lower interest rate.

The fact that you paid on the accounts is going to help here, like I said earlier. As for an attorney, it will be easier on you to have an attorney for the AP, that represented you in your chapter 7. Since you need to put a bit more time between now and filing, find an attorney and pay them off in installments, with the intent of filing in a couple of months.

I understand the part about not working. I did the same thing. After a lay-off in January, I kept my income low (just unemployment insurance) so that I would qualify for a chapter 7 instead of a chapter 13. Filing chapter 7 instead of chapter 13 is allowing me to go back to school and make some life changes I have been needing to do for a long time.