Planning on stopping payment on cards next month, but can't file until October?

[Diesel73L]

My wife and I have been in a lot of debt for a couple of years now but push is finally coming to shove. I'm pretty sure we're finally going to stop paying on our cards in January. The straw that broke the camel's back was my wife being out on maternity leave. She will go back to her job as a teacher at the end of January so we will have too much income to file for CH7 at that point. The kicker is that she already knows that she will be laid off permanently at the end of the year due to budget cuts. By my figures we won't be eligible for CH7 until October of 2012 due to how much money she will have made between January and June. The calls I think we can handle during that time-we're just both afraid of getting a judgement in the meantime since we're going to have to wait. Should I consult with an attorney before stopping on the cards because of that?

[DirkDiggler]

Its different with everyone, but we stopped paying on our CC's in March 2011 and when we filed in Dec 2011, we hadn't been sued, in fact we had just started getting settlement offers from collection agencies right before we filed. I'm guessing we had a couple more months before we would have been sued, but every case is different

[Resigned2BK]

We stopped paying across almost every card back in Sept 2010 and didn't get anyone trying to think about suing us until August 2011. And we still haven't filed -- or been sued. We've basically challenged the collection law firms on DH's accounts to prove that they have the authority and that we owe what they say, etc., and that's been enough to delay them. But then again, we are pretty much just about judgement proof and that may not be your case. That being said, though, I'd reckon you might be ok for that long unless you have $5K or so just sitting in a checking or money market account. When it gets to the 3rd party lawyer collectors, they are looking for easy money. That's just my experience though, as some say here, your mileage may vary and all that.

[DirkDiggler]

I'd like to add that our strategy was to NOT speak to anyone via the phone, email or snail mail. We did that from the very beginning, once we decided to file BK, it kept them guessing so to speak

[buffetbuster]

It's funny, you are in the same situation my wife and I were in. My wife is also a teacher, and the straw that broke our back was my wife being on maternity leave. Is your wife getting any income at all while on Maternity? To file CH7, the means test is determined on the last 6 months of income. Our attorney told us, since my wife was getting no income on Maternity leave, that we ould use that to our advantage. Just an FYI on that.

As far as getting sued and judgements, we had both. All of which were stripped after the CH7. If you get sued before you file, you'll have to appear at your local courthouse at a certain time to either say Guilty - You owe the money or not guilty - you don't owe the money. If you don't show up, it's a default judgment against you saying you owe the money. No big deal...that'll get taken care of in your CH7. Don't worry, there is no jail time. There is no such thing as a "debtors prison".

[spidge]

Sorry about your situation, and hope you are better in the end for it. Hard to imagine now, I know. If your wife was given anything in writing about her layoff I wonder if the trustee and judge would consider the look ahead in your finances to determining 7 or 13. Don't fear the creditors to much. Retain an attorney and refer the calls to them. We started off with the thought of filing a 7 and it kept the creditors at bay for almost three years when we decided to finally file a 13. There was some set up involved. Discover began suite just as we filed.

Take a big breath and read read read. Then relax and settle in with what might happen. I don't know about everyone else, but knowing what might happen and understanding the end results was most of the anxiety. A killer attorney helps too.

[Diesel73L]

It's funny, you are in the same situation my wife and I were in. My wife is also a teacher, and the straw that broke our back was my wife being on maternity leave. Is your wife getting any income at all while on Maternity? To file CH7, the means test is determined on the last 6 months of income. Our attorney told us, since my wife was getting no income on Maternity leave, that we ould use that to our advantage. Just an FYI on that.

Great to hear from someone in a similar situation-thanks for posting. Here in NJ you get Family Leave Act money during maternity leave for six weeks (she will have been out for twelve weeks total) which is 75% percent of your regular pay. She also was able to use some accumulated sick time as well so it's only now that we're in the home stretch that we're having a problem. She goes back in late January and will be back to full salary in February, which will put us above median for our area. We're planning on talking with a lawyer soon to see about timing our filing based on the fact that from February to June she'll be making her full salary, but starting July 1st she'll be on unemployment.

As far as getting sued and judgements, we had both. All of which were stripped after the CH7. If you get sued before you file, you'll have to appear at your local courthouse at a certain time to either say Guilty - You owe the money or not guilty - you don't owe the money. If you don't show up, it's a default judgment against you saying you owe the money. No big deal...that'll get taken care of in your CH7. Don't worry, there is no jail time. There is no such thing as a "debtors prison".

The only thing that scares me at this point is having judgements levied against us to the point that it makes it hard to pay the mortgage and the car payment. Once she's on unemployment they can no longer garnish but I would be fair game. Hopefully we can either file sooner than I thought or just wait them out and file once they get around to suing us. Congrats on your recent discharge!

[JackBondLove]

There are all sorts of stalling techniques to use. I was in a somewhat similar situation. When I stopped paying my creditors, I had no income, but $36K in the bank and an unimproved lot (that I ended up selling for $24K.) I used the next 4-1/2 months to think of easily allowable things to buy (e.g., stuff that a trustee would have no objection to, like dental work, necessary home appliances, etc.); food, rent & regular living expenses; and finally a cheap home ($40K), with any necessary repairs to that newly purchased home. After the 4-1/2 months, I was out of cash, and officially made the decision to file for Chapter 7.

During this time, the cash sitting in the bank account would have been a nice juicy target of a creditor, so I had to stall them. I first said that I was having some "cash flow" issues, but that I hoped I could resolve them within a few months. Then when a few months passed by, I mentioned that I had consulted with a BK attorney, but had not decided to file as yet, and was interested in any type of settlement that could be done, with the funds coming from a HELOC from the old property - and made it clear that everything would need to happen in a certain way for me to pull it off, lest I just file for BK. I would tell one creditor that I was waiting for another creditor with its offer, etc., etc., and always asked for as much time as possible for me to try and arrange this "grand bargain". Then the time to officially decide to file came, and I simply told them that I had thrown in the towel, and gave my attorney's phone #.

[daytona]

You could probably stop paying now if you are certain you are going to file. My recommendation would be to not take any calls from the creditors. About 3-4mo in you will start getting settlement offers from them with a "flurry" right at 6mo. At 6mo they have to "charge off" the debts and will usually sell them to 3rd party collections. You will then start getting letters and/or calls from them. No reason to ever take a call from collectors IMO. Many are temepted to tell them they are going to file, etc... they don't care and have heard it all before. Now when you start getting the letters from third party collections you need to send them a certified letter to "debt validate" them right before the 30day window expires. Obviously you already know the debt is probably yours, but its just a tactic to delay them.

In essense, they send the letter, you wait ~30days from receipt of letter to ask them to validate...most never respond or transfer to another collections agency, then you start the process again after getting a letter from the next agency. The beauty is that most collection agencys won't try to sue you before the DV period expires, because if they do then they can have other issues. Same goes for accounts transferred to "law firms", they send letter and you DV them as well. It takes them time to respond, if they even bother...usually months because they have to go back to the original creditor and get 6mo of statements, etc. If they resond, they just mail the statements (not proof of any assignment) and still usually don't sue. So if the charge takes 6mo, another month or more b4 you get anything from collectors or law firm, another month to DV, and another 2-6mo (if ever) b4 they respond easily gets you through October...

If you do happen to get sued, well that takes time as well. First you must answer the suit. Next with discovery, court delays, etc it will take them lots of time to actually get a judgement on you. They can't garnish or sieze bank accounts, liens, etc until they actually get a judgement. By that time you file the BK and all their efforts were for nothing anyway becaause the BK trumps them.

Think "Ring around the rosey" on the process....

[Miknan]

My wife and I were over the median but we filed Ch 7 after she became so sick we didn't (and still don't) know if she'd ever work again. Our attorney said he didn't think it would be a problem. A Presumption of Abuse was filed but I never really heard anything about it and our discharge in Ch 7 went pretty smoothly except for one asset issue I have.

The destruction of my credit was rapid. We had a ton of debt but was on time with all payments. My wife got sick in March and I knew immediately we were doomed financially. We stopped paying everything in May and filed in July. We ignored every call except a couple that called me at work and I told them not to call me there and they didn't. It wasn't as bad as I thought it would be. I was discharged in Nov but I'm not closed yet.

[btbeme]

It is relatively easy to go about 9 months without getting a default judgement. First, it will be 120 days from your last payment before the card companies can even start collections. Then, if they act immediately (most do not) they can file suit. In most states you get about 30 days to answer that suit - and an answer can buy you another month or so. There are plenty of delaying tactics than can be played out during that time. Since most card companies will not act that quickly, you will probably get 120-180 days before suit, then 30 or so days to answer, then another 30 days or so before a court appearance.

I do, however, recommend that you answer calls from creditors from time to time. That way they leave you alone at work and don't call all your relatives trying to find you. Also, you can discuss your situation - pregnant wife on leave, no income, but that you are "trying your best" and want to make good once things improve post-pregnancy, etc. Just don't send them any money.

[tobee43]

diesel, since you are in nj, most likely you are going to be filing federal and not state. (nj is a creditor friendly state) we moved out of nj and into florida waited two years to file. we needed to get the wild card exemption that florida has, only problem was you had to have established residency for two years prior to filing, so talk about ditching the creditors...wow we did it.

however, we moved out of state, no forwarding address, no phone numbers etc. it was like being underground. as others advised, you can go at least 9 months without them filing. you need to remember even if they do and they get a judgement you can move to vacate that judgement when your bk is closed, so the judgement will ge ousted anyway. (it will just cost you a bit more to file the motions to vacate), but certainly not the end all. so it's not a big issue if they do sue you and then you file bk. also you list those judgements on the petition themselves, and again, after the close, the motions are filed, granted and the judgement is GONE.

just a note: nj will be paying her unemployment insurance i'm certain. check to see if that works into your means test or if that income is protected under the ss act. it varies state to state, and in the state we live in now, county to county. actually, you're more likely to file federally in nj, so i would just look into that first and make sure.

best of luck to you!

[Diesel73L]

Thanks all-I hope some of you are still tuned into this thread because I have some more questions. My first payment for January is due on the 7th-$500 to BofA-I owe them about $27K. I have two more credit cards due in January-Chase for $150 and Citibank for $120. I have already updated all of them with my GV number and will have my voicemail set to give my name and address. This week at work I'll download and print all statements associated with the accounts. Do all of my bases seem covered there? Now for my next questions:

When should I retain an attorney? The reason I'm stopping payment now is because if I don't we won't be able to make my truck payment or the mortgage in February. Would there be any advantage to retaining an attorney immediately as opposed to waiting until we're closer to filing?

By stopping payment on my minimums we are actually going to be saving a fair amount of cash each month because though we're coming up short in February due to my wife's maternity leave, one she is back to work and we're not paying, we'll have about $1300 a month (what was previously going to credit card minimums) left over, but that will be short lived. Starting July 1st my wife's income will be cut in half once she starts receiving unemployment. What should I be looking to put that cash into in order to keep it from being seized in BK? Home improvements? College savings for my daughter? Non-perishable food, etc...?

[tobee43]

Thanks all-I hope some of you are still tuned into this thread because I have some more questions. My first payment for January is due on the 7th-$500 to BofA-I owe them about $27K. I have two more credit cards due in January-Chase for $150 and Citibank for $120. I have already updated all of them with my GV number and will have my voicemail set to give my name and address. This week at work I'll download and print all statements associated with the accounts. Do all of my bases seem covered there? Now for my next questions:

When should I retain an attorney? The reason I'm stopping payment now is because if I don't we won't be able to make my truck payment or the mortgage in February. Would there be any advantage to retaining an attorney immediately as opposed to waiting until we're closer to filing?

By stopping payment on my minimums we are actually going to be saving a fair amount of cash each month because though we're coming up short in February due to my wife's maternity leave, one she is back to work and we're not paying, we'll have about $1300 a month (what was previously going to credit card minimums) left over, but that will be short lived. Starting July 1st my wife's income will be cut in half once she starts receiving unemployment. What should I be looking to put that cash into in order to keep it from being seized in BK? Home improvements? College savings for my daughter? Non-perishable food, etc...?

i think it's a matter of your strategy.

what we did was this: we retained an atty immediately. since ( and i really should say this because i have worked for excellent attys as well as horrible ones), however, trusted NO ONE at the time we did this...so what we did was found an atty to retain and then made monthly payments stretched out for some time. we advised the firm to hold off even when they were paid in full, due to certain things on our petition that required a time period and we needed to answer every question truthfully...we needed "time" to do that.

since we retained the atty, the firm advised us if any creditor contacted us to give them their phone number. it really didn't mean much as until you actually file, a creditor can pursue you, however, it is helpful to know someone is there, in the wings, just in case you feel pushed to file sooner than you expect to. actually the firm we hired contacted every creditor and told them to direct all correspondences to the firm directly. (which not a ONE did), but at least we felt somewhat better to know someone was there just in "case".

we saved every dime after we stopped paying our mortgage, but continued to pay our credit cards up until our filing date...(part of our stragegy and as a result our credit scores were quite good after our filing; like up in the high 600's), and made our move out of nj.

the trustee never asked us what we did with what we didn't pay our creditors and if she had, we would have been truthful and said we lost our home after over 30 years (actually were technically homeless when we filed) and all our money was used in our move. once we filed, we continued to save for those couple of months before our 341 as well, and once again were never asked by the trustee what we did with our income while we were awaiting our 341, although, i must point out our income at the time, were all ss exempt...unemployment insurance income, ss, and state pension...all of those were exempt income for us. so it worked out to our best interest.

also, just a suggestion, it's best to post "new" threads as opposed to keeping this one going. only because as threads get older many times they get pushed out. you'll be surprised to find those that have followed your situation from day one