Can a creditor use recoded phone calls against you to keep from being discharged?

[drowningfast]

I have been negotiating with Union Bank for over a year. I owe them on 2 accounts. The first is $9000 and second $4000. These are un-secured business lines of credit. A month after I stopped paying I began receiving phone calls requesting payment. I told them that my income has dropped substantially and that they were simply going to have to negotiate this debt with me. I told them that I was going to negotiate all of my debt and that if creditors didn't negotiate that I would be forced to file bankruptcy.

Well we have been negotiating like I said for over a year. They filed a lawsuit. I filed the answer and we reached a settlement. $2500 cash, which I paid, and $250 per month. If I default they automatically win the judgement. Well I defaulted in January. They haven't filed the default judgement yet. I am right near bankruptcy based on my current financial situation.

I am worried that I may have said the wrong things during initial negotiations as I was not very well informed. I did require all recordings to be turned off, but I don't know if they can still use them in court if they were recording anyways. Based on my above statements did I do wrong?

[SMinGA]

As long as there were no confessions of fraudulent activity, then no - they can't hold those agreements/conversations out in a way to stop your bankruptcy.

[drowningfast]

As long as there were no confessions of fraudulent activity, then no - they can't hold those agreements/conversations out in a way to stop your bankruptcy.

So is telling union bank that I intend to negotiate with my creditors while paying everything on time except for them considered fraud?

[SMinGA]

No.

Fraud would be looking for ways to hide money/assets. Or intentionally charging now things that are not necessary when you know you're going to file. (Such as you have $5k unused credit limit so you take a vacation, planning to file the day you return.)

[justbroke]

I don't see any issues at all. I don't even see this creditor filing a complaint with the BK court to make the debt non-dischargeeable. I think you're worrying for nothing.

[JackBondLove]

When a creditor would call, I would just use the blanket excuse:

My cash flow has deteriorated to the point that I do not believe that I am solvent enough to continue to meet my debt obligations.

When asked exactly what happened, I responded that I wish to keep that private, and would only divulge such information as past of a BK filing. When asked if I still had money in the bank, I said that I did, but that in my estimation, there was only enough for me to live on until such day that my financial crisis would pass.

When asked if I could make a payment, I would always say that per the instructions given to me by my attorney during our free consultation, that I should refrain from paying one creditor unless I was prepared to pay all creditors, as that would cause problems if I were to file BK (i.e., preferred creditor.)

I would always add that although I had had a free consultation with a BK attorney, that I had not made the final decision to file, and that if I could get my creditors down to a low enough level, that I would not file.

I should say that when the Hindians from Nationwide Credit called, I added that my computer software consulting business was having hard times because my country keeps on letting in the damn foreigners, or outsourcing to those same foreigners, to take away American's jobs. I got a little snicker from the supervisor that I was talking to at the time.

[drowningfast]

so is "preferred creditor" a problem? I'll do a search now, but if anyone can sum it up?

I stopped paying Union Bank first since they were almost $1000 a month.

[LALADY]

There is another rule that you need to be aware of, also, and that is you must treat all of your creditors equally. That is, you will not be permitted to pay one credit card company $500 and others nothing merely because you were hoping to protect one creditor from suffering a loss because you're hoping to keep that creditor's card after filing bankruptcy. If you pay any creditor $600 or more over and above the amount you would normally have paid it, the excess amount could be recaptured by the Trustee and redistributed to the remaining creditors.

[keptdigging]

I've seen the preference thing stated quite differently: That you absolutely CAN pay preferred creditors over others. However if you pay $600 or more within 90 days (a full year to an "insider" like a family member) before filing, the Trustee can claw this back from the creditor. The downside of this is that (1) you will have failed in paying the creditor you hoped to; and (2) you have just become an asset case if you weren't already.

I bring this up because it is so often stated as a rule "you can't file bk if you have..." rather than "if you've done this, here's what will happen."

Am I missing something?

[SMinGA]

Well put Keptdigging, that is my understanding also. Excess payments to one creditor won't prevent you from filing bankruptcy.

In all honesty though, if you are certain that bankruptcy is in your future - it is probably wise to stop paying all unsecured creditors. And also stop using the cards...

[music12]

i think you are totally fine. as to preferences, if the trustee finds that you paid one creditor too much, the trustee will deal with getting the money back from that creditor and distributing it among other creditors. it's nothing for you to worry about.