Chapter 7 concerns....

[loser104]

Hi everybody, been reading this forum for the last few weeks. Would like some guidance BEFORE I visit any attorneys, if nothing else, but for some peace of mind til then.

Just lost my job this month (jan.), knew for the last couple of months that this was coming. Have been sending out resumes like crazy, but nothing yet. I did not pay my mortgage and 2nd mortgage in jan., since they are my biggest bills ($1700 total), trying to conserve cash (just in case I have to file a ch. 7), hoping to play catch up if and when I do find employment. I did pay on my cc though and will continue to do so, because the monthly minimum is only about $175. Not planning on charging anything else at this point either.

My concern is this. In November, right around the time I was informed that I would be layed off, I transferred balances ($4000)from one cc to my current cc, because of a yearly fee associated with the first cc, and more importantly because the first cc was associated with the bank where my checking account is. Didn't feel this was smart, just in case of a worst case scenario and I did have to file BK.

For the past 3 months, I've used that cc for food, gas, car repairs, prescription glasses (old pair broke),utility bills, christmas presents, etc. while making only the minimum payments, mostly so I could conserve cash. CC balance is now about $11,000, and now I've got a nice nest egg saved up, about $16,000, which I'm pretty sure a wild card exemption can be used for $10,000. From what I understand, I can spend some or all on necessities, apartment rent?, and keep receipts for the courts.

Do I stop paying the cc, or should I continue to pay while NOT paying the mortgage? Is that preferential treatment of creditors? Still have a small glimmer of hope that I might find employment somewhere out there and then I could get current on the house and pay off the cc.......but if no job, I'm concerned that the cc company (BOA) may come after me. Should I make 1 more payment on the house since I do have more $$$ in my checking than I would be able to exempt?

Thinking about seeing an attorney in feb. some time. Hit me with some opinions and views on my situation.

[OhioFiler]

You need legal advice.

[HakunaMatata]

Do you know if you are a C7 candidate? If not, you may want to start by entering data into the online Means Test (bear in mind, this is a guide...not the sole determining factor in C7 or C13 status):

http://www.legalconsumer.com/bankruptcy/means-test/

If I were you, the first questions I'd ask are: Do I want to keep the house? Do I have equity? If the house proves worthy, you will need to be current prior to filing C7.

Do you have debt aside from the $11k card?

The balance transfer wasn't the smartest move if you truly believe you're on the C7 path. Typically, this will need to age several months prior to filing. It is commonly recommended you continue to make "good faith" payments.

Since you have a nest egg, I strongly recommend relying on this as your source of support (in lieu of credit cards). If you intend to file, credit card use needs to cease. Most recommend activity cease 90 days prior to filing (and this should not include "luxury" purchases).

Depending on your exemptions, you may be able to protect some/all of your cash. The amount you have on your filing date is significant. If you have a tax return coming, you need to take this into consideration as well.

Your mortgage is secured and your credit card debt is unsecured. This won't present a preferential issue. Many people go through foreclosures and maintain credit cards, personal and/or auto loans. My situation was somewhat similar to your situation. I knew I was giving up my house; however, it took time for me to decide if I wanted to follow the strict foreclosure path or bundle everything in BK. I stopped paying my mortgage and continued to pay my credit cards while saving money.

Most definitely meet with attorneys (yes, more than one!). Most offer free consultations. You're in the potential or planning BK stages and sound legal advice will be beneficial.

[BCA2009]

Loser104,

Are you saying that your only debt other than your mortgage is 11K on credtit cards?

How upside down are you on your house? I'm not sure I would file BK just to avoid paying 11K of ccard debt. I wouldn't pay them anything else and just wait it out a while, they will probably offer to settle in a few months for 40-60% of the balance. You can negotiate them down from that.

Now if you have other debt, and if you are upside down on your house and want out, that's a different situation, but it kinda sounded like you wanted to keep your house in your post.

As far as protecting your cash on hand, I would definitely consult an attorney in your area about local exemptions. But if you are unemployed for a while that balance will go down quick.

Good Luck!

[OhioFiler]

What is most interesting is the OP was planning his BK in November and then ran up at least $7,000 unsecured debt while stashing $16,000 in cash. I'd plan to get some serious time between November 2009 and his filing date.

[loser104]

Well, I don't know if it's all that interesting, though I guess I did leave out some details that may be helpful.........my checking account balance was due several factors--I got a small severance package from my previous employer, a very nice income tax refund ($6000) this past week and a refund of about $2000 from several classes (+ books) I was going to take at a local community college (in case I never did find other employment), but backed out out at the last minute. I thought I might get school $$$ from the WIA program, but the more I learn about the program, the more I came to believe that I would never see one dime.

And it's not that I've had this ch.7 plan formulated since november, it's just I like to have options and backup plans to cover all the bases. I did not, in a million years, expect to be laid off, I really thought my job was safe.

I am very much upside down on my mortgage, and have been for the last 3 years. But, when I was still employed, I did not care, I could easily make the payment and that was all that mattered. I really love my house. The point now is that I don't have any income other than unemployment and if I don't find another job, I do not want to keep emptying my savings if I will lose the house anyway 6-12 months down the road. I'm sure you see my point. If the bank forecloses, then so be it, life will go on. Would like life to go on with some money in the bank.

My concern and inquiry about the whole ch.7 stems from what the mortgage company (which holds my first AND second) will do as far as wage garnishment in the future, hence, a possible chapter 7 filing to avoid hassles for the next 30 years + of my life.

And as far as "running up" the cc debt the last 3 months, before I knew I was getting laid off, I was charging everything I could to a rewards cc ($1700-2500/month) and paying it off at the end of every month. When I got word of the layoff coming down the pipe, that's when I went into "cash conserve" mode and started only paying cc minimums.

I really do appreciate everyone's opinion here, it is very helpful, I really do mean it. As I said in my original post, I WILL SEEK AN ATTORNEY, but until then, please tell me what you think.

Thanks

[HakunaMatata]

The mortgage company can't garnish wages during the foreclosure process. Your property serves as collateral. Your only potential concern would be a deficiency judgment following the foreclosure (the difference between the auction selling price and your loan). Many States don't permit deficiency judgments AND even in States where they are acceptable, many lenders don't pursue them. You don't have any imminent concerns in this domain.

My BK planning didn't stray much from your thoughts. There were differences...I wanted to surrender my house (pondered foreclosure exclusively) and I was employed. I stopped paying my mortgage and saved. Like you, I had a CC I used for nearly every expense and had previously paid it in full monthly (~$1k). As notions of BK surfaced, my payment behavior altered and I began paying only the minimum. I made the mistake of submitting payments almost up to my filing date. I didn't have recent balance transfers; although, I was concerned with recent charges (only 60 days aged).

I don't think you're entirely off in your potential planning phase. You should continue to pay on the balance transfer and recent charges (make "good faith" payments for several months). Understand your exemptions (this is very important if you're entering BK with savings). Reassess your desire to remain in an underwater property (which I think you're already doing). Don't sacrifice your life jacket (savings) to save the house.

[iv65536]

Hi everybody, been reading this forum for the last few weeks. Would like some guidance BEFORE I visit any attorneys, if nothing else, but for some peace of mind til then.

Just lost my job this month (jan.), knew for the last couple of months that this was coming. Have been sending out resumes like crazy, but nothing yet. I did not pay my mortgage and 2nd mortgage in jan., since they are my biggest bills ($1700 total), trying to conserve cash (just in case I have to file a ch. 7), hoping to play catch up if and when I do find employment. I did pay on my cc though and will continue to do so, because the monthly minimum is only about $175. Not planning on charging anything else at this point either.

My concern is this. In November, right around the time I was informed that I would be layed off, I transferred balances ($4000)from one cc to my current cc, because of a yearly fee associated with the first cc, and more importantly because the first cc was associated with the bank where my checking account is. Didn't feel this was smart, just in case of a worst case scenario and I did have to file BK.

For the past 3 months, I've used that cc for food, gas, car repairs, prescription glasses (old pair broke),utility bills, christmas presents, etc. while making only the minimum payments, mostly so I could conserve cash. CC balance is now about $11,000, and now I've got a nice nest egg saved up, about $16,000, which I'm pretty sure a wild card exemption can be used for $10,000. From what I understand, I can spend some or all on necessities, apartment rent?, and keep receipts for the courts.

Do I stop paying the cc, or should I continue to pay while NOT paying the mortgage? Is that preferential treatment of creditors? Still have a small glimmer of hope that I might find employment somewhere out there and then I could get current on the house and pay off the cc.......but if no job, I'm concerned that the cc company (BOA) may come after me. Should I make 1 more payment on the house since I do have more $$$ in my checking than I would be able to exempt?

Thinking about seeing an attorney in feb. some time. Hit me with some opinions and views on my situation.

One problem is that the $4k CC balance transfer could end up being considered a preference, and the bank where you have your checking acct would be forced to pay that amount to the trustee. That being said, I would move your checking account to a bank you've never borrowed from. Also, I thought about getting a spare pair of eyeglasses, and 6-12 months' worth of contacts, but would probably have wanted a new exam first.....