My husband paid of his credit card off($3600), help please

[suljaga13]

Hy my name is Xxxxxxxx, I am about to file for chapter 7 alone( without my husband, we live in Illinois).

We got tax refund on 3/1/2013 in the amount of $6700, my husband paid off his credit card ($3600 ) at once(one payment).

I would like to file chapter 7 somewhere in the August of 2013, which is not 6 months form when my husband paid his cc.

My question is this going to be presumption of abuse somehow. My husband is not filling bankruptcy.

Also he is the only one working right now, all the income we received for the last year it was his.
I have not been working, been going to school.
Thank you in advance.

[LadyInTheRed]

Paying off debt is not what leads to a presumption of abuse. It's the means test that determines whether there is a presumption of abuse.

Paying one creditor more than 600 within 90 days of filing is a preference payment. The consequence of a preference payment is that the trustee can get the money back from the creditor. I am not certain, but if this is your husband's separate debt paid with his income, it probably won't be an issue. Just make sure to let your attorney know about it in case it needs to be disclosed on your statement of financial affairs.

[AngelinaCat]

Hi suljaga13

Welcome to the forum. I removed your name from the public post for your security. We prefer to not have people's proper names out in the public. Some get through in spite of our efforts.

As to your husband and the credit card: is the card in his name only? If so, do you have 'Authorized User' privileges?

I guess I am asking if any of the charges on the CC that DH paid off, belong to you? If so, you may need to delay filing at least six months if not longer, past that payoff date.

If those charges do not belong to you, please say that there is paperwork that will support your position that those debts/payments are your DH's only and not yours.

[ccmisery]

Trustee asked me what I did with my 2012 tax refund, said I used it as a down payment for a new car and the rest to pay my lawyer for filing and fees. I also paid plenty on my credit cards back in the fall of 2012, in an pointless effort to bring them back to current, it was too little too late.

I dont' think you have anything to worry about as long as your checking account is not joint and no credit cards are in both names.

[IBroke]

I guess I am asking if any of the charges on the CC that DH paid off, belong to you? If so, you may need to delay filing at least six months if not longer, past that payoff date.

Hmm, in regards to delaying the filing in regards to the CC - I was always under the impression that you would have to wait six months if you had larger recent CHARGES on a CC in order to being able to have them discharged. In this case, however, I don't see a reason why she would have to delay anything because I don't even know how it could be technically possible that charges on a CC belonging to her husband could belong to the OP in the first place. Since it is not her account, it will never be her debt.

Now in regards to larger payments, I thought that if it is determined that it was a preferential payment, the trustee would get the money back from the CC issuer. The way I see it is that the trustee would focus on the tax return in order to determine what portion of it belongs to whom. If the $3,700 was the husband's "fair share" of the money, the OP should be fine.

[suljaga13]

Thank you all to quick response.
I forgot to mention we have a joint checking account. So when they review the last 6 months of our bank statments they will see this $3700 paid to my husband's CC. The CC is in my husband's name only. So if I understood good, this is still preferential payment, and worst case scenario is that they would go after that $3700, even though I wash,t even an authorized user on that CC.

[AngelinaCat]

If you have paid off one debt, and not made any payments to your other creditors, that is a 'preferential payment'.

How this will impact YOUR case, I do not know. The card was your DH's only, and you were not an authorized user. However, if the money came out of your joint checking account--that is what I am concerned about. If he had a separate account, and paid this cc off from that, I don't believe you would have a problem. But, from what you said, this money came from your joint account. That may be a problem.

Are you pursuing some free consultations with BK attorneys? If you aren't, you need to. This will be an excellent question to ask.

[IBroke]

So if I understood good, this is still preferential payment, and worst case scenario is that they would go after that $3700, even though I wash,t even an authorized user on that CC.

Not necessarily. Especially not if your husband can prove that at the time of payment $3,700 on that account belonged to him. I assume he has a source of income, too?

I'm also having an issue calling this transaction a typical "preferential payment" because these payments are usually made to debtors of the individual who is filing for BK. This, however, is not the case this time.

[IBroke]

How this will impact YOUR case, I do not know. The card was your DH's only, and you were not an authorized user. However, if the money came out of your joint checking account--that is what I am concerned about. If he had a separate account, and paid this cc off from that, I don't believe you would have a problem. But, from what you said, this money came from your joint account. That may be a problem.

Yup, I'd say this requires a skilled attorney who's able to clearly point out which funds at what time belonged to whom..

[LadyInTheRed]

Yes, you need to ask your attorney about this.

If it isn't a preference payment, it could be a transfer to an insider because OP's cash was used to pay her husband's debt, arguably making 50% of the payment a transfer to the husband. So, the trustee might come after the husband to get half of the payment back. You'd have to wait 1 year to avoid that risk.

I don't know where the 6 months is coming from. The law on preference payments is that the trustee can avoid a payment to any creditor who is paid over $600 within 90 days of filing, or within 1 year if the payment was to an insider. There are other criteria as well. See 11 USC § 547: http://www.law.cornell.edu/uscode/text/11/547

[ccmisery]

I see, joint accounts are fair game in most states, not sure what the laws are in your state but I would also take the recommendation of consulting an attorney or wait to file, had the same problem as my wife and I both filed jointly, and the lawyer explained the major issues with jointly held checking accounts, luckily we did not have any joint accounts at the time or prior year. I was also asked to disclose any large sales or transfer of property, most were over 7 years and beyond the statutes I guess?

Typically 50% of what's in the joint checking account can be used to pay back creditors, no matter if the other person is filing or not. If your tax refund was based on a jointly filed tax return, than that probably makes it even more of a case and Trustees are always interested in tax returns.

[keepsmiling]

OP has zero income.
Does this make a difference?

[LadyInTheRed]

OP has zero income.
Does this make a difference?

I don't think so because her husband deposits his income to a joint account. It becomes half hers as soon as the deposit is made.