Large expense on credit card

[jenbow]

I have been planning on filing chapter 7 in december.. however, since my husband and I decided to walk away from our business and are closing the doors at the end of August we are hoping to file sooner.

The issue is on June 22 I used my credit card to pay a vendor $6,700. At the time, the vendor cut us off and we were desperately trying to hold on to our business. So we paid the vendor so we could continue.. now, its pretty obvious that we have to close.. I am hoping we can file soon so he can go get a job and start paying some of our non dischargeable debt and pay our mortgage.

What do you think will happen? Anyone have a any experience with such a large charge to a personal credit card?

[bigtim6656]

My understanding is most say to wait 90 days from the last day you use the card. SO july, aug, sept so you should be ok to file on the 23rd of sept I would think. What i would do is find a lawyer and get your intact setup and ask. mine recommend I wait a year due to a house transfer. I also had a business that went under and feel your pain. I will be finally filing next month. Luck me is that I was un able to get CCs when I hit 18 by the time I got my credit where I could the business went down and took my credit with me so I have zero cards to worry about.

[Flamingo]

You need a good business BK lawyer since the lookback period regarding business and personal BKs may be longer and you made that payment from a personal account to pay off a business debt. Filing sooner may not be an option.

[bigtim6656]

that was why I said to talk to a good lawyer, I was unsure if the business would make things different. Luckily my business went down ohh 6 maybe 7 years ago.

You need a good business BK lawyer since the lookback period regarding business and personal BKs may be longer and you made that payment from a personal account to pay off a business debt. Filing sooner may not be an option.

[backtoschool]

Filing only two months after putting such a large charge on your credit card will most likely trigger an AP, which you will have to pay to go to court to defend. (AP's are separate legal actions that are part of the bankrupcty, but separate proceededings. They cost around 5k to defend) Your creditor can file an AP on the basis of fraud without having to prove fraud if the charge is up to 90 days from filing. 90 days is the legal definition of insolvency for bankruptcy purposes.

The creditor can file an AP even longer if the charge is not a necessity and has never been paid on. They will have to prove more though.

You should talk to an attorney about timing your filing. Filing now may end up costing you AP legal fees and make that particular charge non dischargeable.

[jenbow]

How long would you wait? Would 90 days be enough or would you wait six months?

[wnguyen]

I think six months or more of waiting time would be better for you. The longer the time you wait to file, the harder for the creditor to prove.

[wnguyen]

And in the meantime (waiting time), try to make minimum payment if possible, not all six months but 3, 4 months. This way, the creditor would probably have harder time to prove that you didn't have intention to pay it back. I learned about this a little too late.

[jenbow]

I just cannot wait 6 months.. that would be at the end of the year and my husband has to get a job so we can start paying our huge amount of IRS debt that we have. We are barely making it on my income alone let alone a $1,500 monthly payment to IRS. Urgh, our life sucks right now.

I wish I could go back 6 months and do things over.

[jenbow]

One more question.. if Chase does file a AP, would they take a settlement. The amount in question is $6,700.. perhaps I can try and get $2,000 and offer them this amount. Perhaps, I can do this now or this would probably be a preferential payment. Urgh, the web I have created.

[bigtim6656]

I would think 90 days would be good. The law says no charges for 90 days then it means 90 not 180. I would get in and do an interview with a lawyer. He can tell you for sure.

[backtoschool]

You cannot offer them any money now, as it will be a preferential payment and the trustee will just take the money back from chase.

If you do not wait six months, there is a strong chance of Chase filing an AP. If they win the AP, you will owe the 6,700 plus Chase's court costs and your court costs. The $6,700 and the court costs will not be dischargable in any bankruptcy.

If you lose, and owe the nondischargable $6,700 and court costs, you may be able to make payment arrangements with Chase, but since you will not be able to file bk on the debt ever, Chase would have no incentive to settle with you for less than the full amount.

Of course you may get lucky and Chase may not file an AP. As with anything ymmv. But if you file right now and do not wait, the chance is pretty high that they will file an AP.

[metoo]

I just cannot wait 6 months.. that would be at the end of the year and my husband has to get a job so we can start paying our huge amount of IRS debt that we have. We are barely making it on my income alone let alone a $1,500 monthly payment to IRS. Urgh, our life sucks right now.

I wish I could go back 6 months and do things over.

What does waiting a few more months and your husband getting a job have to do with each other? Not sure I understand??

[keptdigging]

First of all, let me chime in with the "you need a good local biz bk lawyer." I mention local because actual practice and even case law varies district to district.

That said, you're looking for some non-legal advise and here's a thought: Your worse case is that the $6,700 is not dischargeable. You make the case quite easy and compelling for Chase if you don't wait at least 90 days.

After 90 days, Chase has the burden of proof. That doesn't mean they won't sue you and they won't win... but it does mean they have a tougher case. In the real world this gives you more negotiating power.

In the end, you can't wait the 180 days to a year that is recommended. So what you're going to do is wait as long as you can, file, and see what Chase does.

If Chase files an AP, it DOESN'T mean it has to go to trial and you're on the hook for their legal expenses. It means it can. But you have the option of negotiating with them.

(Incidentally, my lawyer tells me that when a person in business takes on debt, it is tougher for the bank to prove fraud. If you honestly believed you could turn the business around and pay the $6,700 back, you didn't incur the charges fraudulently. Now your word won't do.. it's what the judge believes. But suddenly burden of proof becomes a big deal and Chase doesn't have a slam dunk outside of 90 days--technically you can even rebut the presumption within 90 days.)

My zero years of law school and zero years of practice in your district opinion is:
1. Wait til the charge is at least 90 days old before you file.
2. See if Chase files an AP (but assume they will.)
3. If they do, negotiate a settlement. Pure speculation is that Chase would be delighted to get half if they can avoid the risk and expense of a suit.


Back on the lawyer thing: you really need a lawyer for all this, because the banks seem to negotiate this stuff much more aggressively when you're filing pro se. So you really should ignore everything I said and and get counsel.

[keptdigging]

Just saw that you're already thinking settlement. You're on the right track... but the time to do this is after you file (and after they make some noises.) Which means, unfortunately, you're settling out of post filing income/assets.

Also Chase WILL make a lot of noise about planning to file an Adversary Proceeding. The threat costs them nothing. Until they actually file suit, they're not even serious.