Credit card use scenario - opinions wanted.

[AboutToSink]

I think I know what the answer is but the wife and I just wanted to throw this out there. We are wondering if we should stop using our credit card (only use one on a daily basis) right now. I just lost my job and we did a budget. We are barely able to make all the bills, or maybe not even, when I had a job and now we think we have to file. We have an appt. with our attorney Wed., we think we are going to file, but what if he says we shouldn't?

[AngelinaCat]

Welcome to the Forum. Without a little more information, it will be hard to give advice. What state are you in? Do you own your home, or are you renting? Do you have a mortgage or two? What about car(s)? How many live in the household? How much debt do you have, and in what forms?

There are more, but that is a start.

[AboutToSink]

Welcome to the Forum. Without a little more information, it will be hard to give advice. What state are you in? Do you own your home, or are you renting? Do you have a mortgage or two? What about car(s)? How many live in the household? How much debt do you have, and in what forms?

There are more, but that is a start.

Me, wife, and 18 month old daughter.

Minnesota, own home - mortgage and a home equity loan.
'99 Chev paid off, '07 Toyota Rav four years left, $17K.
Credit card debt - about $45K
Student loan - $22K

Plan on keeping the Toyota and the house. With the CC debt gone we'll barely make it on unemployment, wife is a stay at home. When I get a job again, things will be good. For a couple months now when I had a job, have been paying $500 to CC that we use, then maxing out... After we did a budget, we can't keep it up.

Feel free to ask for more info...

[AboutToSink]

OK so I now have a different take on things. Went to the store this am and charged some groceries, just out of habit. Got home and looked at the budget again. I can't see how an atty. would say we shouldn't go ahead since we are under the medium income, even with a full time job, but this year I've only worked about 4 months, the rest was unemployment income.

So I decided to stop using the CCs and I already put the bills I don't intend to pay anymore in another pile. That alone seems like a relief off my mind.

Can't wait until we see the atty. on Wed, want to get this ball rolling!

[keepmine]

OK so I now have a different take on things. Went to the store this am and charged some groceries, just out of habit. Got home and looked at the budget again. I can't see how an atty. would say we shouldn't go ahead since we are under the medium income, even with a full time job, but this year I've only worked about 4 months, the rest was unemployment income.

So I decided to stop using the CCs and I already put the bills I don't intend to pay anymore in another pile. That alone seems like a relief off my mind.

Can't wait until we see the atty. on Wed, want to get this ball rolling!

Good plan. It's pretty standard advice here to stop paying all debt you wish to discharge and use that money for living expenses.
Don't be in a tearing hurry to file. See if you can wait until you're working again and have health insurance benefits.

[AboutToSink]

Good plan. It's pretty standard advice here to stop paying all debt you wish to discharge and use that money for living expenses.
Don't be in a tearing hurry to file. See if you can wait until you're working again and have health insurance benefits.

What does having health ins. benefits have anything to do with it?? Or do you mean the fact that I don't have to pay for that myself?

I kinda do want it to get going and be done, I think it will be more stressful having people call all the time, or maybe not. I changed my phone numbers to my home phone, that we don't answer...

[DeadManCrawling]

Generally speaking, the court will view it as thus:

The day you made an appointment to see a BK attorney, you suspected you were insolvent, so you should stop charging.

In reality, most courts will ignore purchases like food and other necessary charges, such as electric bill, for a while. Some will ignore them up until the date of filing. Personally, I would not chance any more than is necessary, vital, and unavoidable.

When you stop paying, that "new" money should be spent on these necessities. This will pay those bills and add verifiable expenses for the means test.

Overall, don't spend money you don't have, is what it comes down to. And if you DO charge, make damn sure it is for something like food, and not too large of amounts.

[swampwiz]

Generally speaking, the court will view it as thus:

The day you made an appointment to see a BK attorney, you suspected you were insolvent, so you should stop charging.

In reality, most courts will ignore purchases like food and other necessary charges, such as electric bill, for a while. Some will ignore them up until the date of filing. Personally, I would not chance any more than is necessary, vital, and unavoidable.

When you stop paying, that "new" money should be spent on these necessities. This will pay those bills and add verifiable expenses for the means test.

Overall, don't spend money you don't have, is what it comes down to. And if you DO charge, make damn sure it is for something like food, and not too large of amounts.

Agreed, although certainly you could consider yourself at some point in time as being in state of closing in on insolvency, with such insolvency being conditioned on events that would (or would not) happen in the future, and you wanted the advice of a BK attorney just so that you know how and when you should proceed. For example, if someone loses his job, he may realize that he could go on for 8 months without work, and if he would start working again before that time, he would be able to met his debt obligations, and thus he would not consider himself insolvent. With that said, he should more or less only spend on necessities at that point.

In my case, I had a long "sabbatical" from work, and was looking to get back into my old line of business; after a year and half of not being to establish my old business at a sufficiently high enough income level (which was a good bit below the level that I used to be able to earn), I figured that I another 1/2 year to go, but decided to talk to an attorney just to plan out what I should do when the time would come. I still had not considered myself insolvent at that time as I still had a realistic expectation that I would be able to get my business back up (of course, could there ever be a legal test for when someone should give up the expectation that he should not reasonably expect to find comparable work in his profession?) However, my attorney advised me that some money I had received in a disaster settlement needed to be in escrow (and therefore, not invested or used to spend down), and so my 6 month buffer evaporated, and I then considered myself insolvent, and stopped using all my credit cards (even the one that I had just paid down about $2K in anticipation of continuing to spend it.) My attorney said that it was quite reasonable for a person in my position to believe that he would be able to get his business back up and running, and therefore there was no problem with continuing to spend and rack up debt.

[Flamingo]

What does having health ins. benefits have anything to do with it?? Or do you mean the fact that I don't have to pay for that myself?

I kinda do want it to get going and be done, I think it will be more stressful having people call all the time, or maybe not. I changed my phone numbers to my home phone, that we don't answer...

Bankruptcy eliminates the debt; it does not resolve unemployment, cash flow, bad financial handling or other issues. So if you file a Chapter 7 to eliminate your debt (you need a job to file Chapter 13), you would be debt free but still struggling.

[wantout]

STOP all card use, cut them up and walk away...dont look back....

Is it hard, YES it is, but we become conditioned to their use, it is all part of the plan to keep you en slaved.

I am filing soon, I consulted and hired my attorney in July 09. in late August I had to take a small cash advance for a emergency that came up, I called my attorney and explained it to his para legal, she said do what you need to do but then STOP all use of cards, do not use them again at all.

That was the last time I touched a card, the advance was only for $400 but I had to do it, no other way around the situation. Thankfully I have receipts for what it was for if the TT asks about it, and since it was not a luxury, I should be fine.

You need to stop using cards and get use dot cash only, it is difficult, has been for me when for years cards have been used as a stop gap...

[AboutToSink]

Bankruptcy eliminates the debt; it does not resolve unemployment, cash flow, bad financial handling or other issues. So if you file a Chapter 7 to eliminate your debt (you need a job to file Chapter 13), you would be debt free but still struggling.

Yes, we will be just scraping by on UI but we'll manage. Mainly because we exhausted our savings during the last layoff. When a new job comes around, things will be good. If we kept the debt, we'd struggle then too.

EDIT: In other words, the job loss triggered the BK thought. But in reality, we were really in trouble with debt before...

[Flamingo]

Yes, we will be just scraping by on UI but we'll manage. Mainly because we exhausted our savings during the last layoff. When a new job comes around, things will be good. If we kept the debt, we'd struggle then too.

EDIT: In other words, the job loss triggered the BK thought. But in reality, we were really in trouble with debt before...

Your last paragraph aboves shows you do "get it." Remember, debt causes bankruptcy. If you lost your job, had a savings cushion in place and did not have the debt you would not have to file. We had the same job loss (layoff) situation which spiraled us into using credit cards to cover the loss of income while my spouse tried to get a job in his field at or near the same income. After a year of horror stories, no good job (convenience store clerk work only for my spouse at that time) and deeper in debt, we filed. Also to help you as to a cash basis, a while ago I read a marvelous quote in a magazine in a credit card article so please remember this quote for the future...."A credit card is a snake in your pocket." Remember that next time you want to reach for it...