Maximizing CH 7...

[enufsanuf]

My wife and I have finally had the "bankruptcy talk". We've been struggling with bills for a long time and I brought up the idea. Here's our situation:

Married w/two kids
$45K/year salary
Wife is unemployed going on a year (staying home with the new baby)
$154K mortgage (no equity)
$22K car loan
$55K credit card debt
Great credit besides the debt (Mid 700 credit scores and no late payments...yet)

We own:

1999 Mazda P/U
$8K 401(k)

Here's the twist:

I'm tired. Sick and tired. I know I've done this to ourselves, but this weight has been on my back for over 10 years. I spoke to a bankruptcy attorney and he made it sound simple. He said "Come on in, we'll file CH 7 and get all of that unsecured debt wiped away". It's all on three cards.

My main question is this. I still have a lot of available credit on hand. If I was to take some very large cash advances ($15K) and make some big ticket items that we want/need, would there be any red flags or problems that I would face? I would then go into the bankruptcy with almost $100K of credit card debt instead of $55K. I just think that if I don't have a large amount of cash on hand and take care of some expenses (car repairs, home repairs, etc.) that I would end up back in financial trouble.

I'm not a scumbag trying to screw anyone over. I've paid these huge minimums for years without missing a payment. The last years have not been about running up the cards on fun things, it's been more about making ends meet.

Lastly, should I even be considering this first or should I try credit counseling? Any and all coments are welcome.

[LostOne0069]

Uh, yeah, charging up a lot of debt just before filing is definitely what would be termed a "red flag" and would almost certainly cause your bk to be dismissed or at the very least the new charges would be non-dischargable.

Not to mention the fact that even if for some reason you got the charges past the trustee (NOT going to happen.) you'd still have those "big ticket items" that he/she would take and sell to pay the creditors.

If you can keep paying your debt and get the balances down without starving to death or having it take 20 years, then I'd try to do just that. If you can't keep up with the payments and are struggling to pay for the things you really NEED to live... then bk may be the way to go.

[anonymuse]

It appears that the "easy" part the lawyer is referring to is that you are clearly below the median income in your state thus having no problem passing the means test. Plus, you have no equity in your home so that appears to be safe also.

But, don't go running up debt pre-BK. That will ruin your case. Try not to use your credit cards at all, and if you absolutely have to charge something, it should be an essential.

You'll get the proverbial "clean slate" after filing, and then you need to learn to save up before you need something and buy with cash.

Everyone's credit come down after BK, but you'd probably be higher than most after coming out of BK.

[enufsanuf]

Thanks...

Thanks for the responses. What's your opinion on credit counseling? I called the Clark Howard show and they gave me the number of a credit counseling agency in our town. I called them but I haven't gone over specifics. From my calculations, I would be paying over $900 a month with 0% interest if I was to pay this off in the five years they allow. First of all, I know they might lower the interest rates (I already have this on two cards with great rates) but I'm not going to get 0% interest. Second of all, I can't afford the $900 a month. If I end up paying this back at less than I owe, they said it would considered a Settlement and that would go on my credit report. Would it be better to do that than bankruptcy?

(Please see my first post about this)
Also, when I mentioned the large cash advances and big ticket items to the attorney I was interviewing, the only thing he said was that cash advances within the last 90 days would not be discharged. He said that was the only problem. If I did the cash advances, and then rode this out another year would I still raise red flags? What happens if they don't discharge the debt and we can't pay it?

[keepmine]

If I did the cash advances, and then rode this out another year would I still raise red flags? What happens if they don't discharge the debt and we can't pay it?


Don't be a dumbass. If you do that and make no payments and try and file in a year they'll still challenge the cash advances. The first question asked will be when did you speak with a lawyer about filing bk. Once that date is established, the court can infer the delay in filing was a spurious attempt to get beyond the 90 days. We've seen this happen more and more frequently. If the debt is not discharged, the creditor can then resume collection activity.
The very second that you think bk is a real possibility, is the instant you stop using those cards.

[enufsanuf]

Don't be a dumbass???

To the person who responded with the quote "Don't be a dumbass", I didn't say I was going to stop making payments. I meant to take the cash advances AND continue making the minimum payments each month (probably using up the majority of the advances). The same goes for the charges I was going to make (car repairs and home repairs). I have cards with zero balances that I can take over $20K off of in cash alone. Probably more in available credit on top of that. I meant to do all of this at once right now and get some things taken care of. Then use the cash to make ALL of my payments for at least a year (making no more new charges during that time) and then file. Like I said, I've always made all of my payments on time but things are finally turning negative for me.

[enufsanuf]

Oh yeah, I've only spoke on the phone to one attorney and asked him maybe 5 questions max. I have not pursued any more than that.

[keepmine]

The cc industry paralnce for what you are describing is, a "bustout". Little activity over a period of time and then, some large purchases/cash advances and then an eventual default.
Personally, I wouldn't risk it. I'll just say again, the minute you think bk is a viable option, put those cards in the sockdrawer.

[jane taylor]

I wouldn't risk taking out the cash advances either! It is a painful process to file BK, but the peace of mind is well worth it! Good luck and keep us posted.

Peace,
jane

[FilingOnMyOwn]

I can't believe someone with the responsibility to maintain that good of credit would even be asking questions like this.

Regardless of intent or outcome, chapter 7 is a 'liquidation' of your assets. So even if you buy a bunch of stuff, then file, all that stuff over the tiny allowable exemption they give becomes property of the bankruptcy estate. The trustee can take anything and everything you have over the allowable exemptions, often as small as $1k in personal property and automobiles depending on where you live.

[FoolAndHisMoney]

Here's the twist:

I'm tired. Sick and tired. I know I've done this to ourselves, but this weight has been on my back for over 10 years. I spoke to a bankruptcy attorney and he made it sound simple. He said "Come on in, we'll file CH 7 and get all of that unsecured debt wiped away". It's all on three cards.

My main question is this. I still have a lot of available credit on hand. If I was to take some very large cash advances ($15K) and make some big ticket items that we want/need, would there be any red flags or problems that I would face? I would then go into the bankruptcy with almost $100K of credit card debt instead of $55K. I just think that if I don't have a large amount of cash on hand and take care of some expenses (car repairs, home repairs, etc.) that I would end up back in financial trouble.

I'm not a scumbag trying to screw anyone over. I've paid these huge minimums for years without missing a payment. The last years have not been about running up the cards on fun things, it's been more about making ends meet.

Lastly, should I even be considering this first or should I try credit counseling? Any and all coments are welcome.

Regarding the attorney you spoke with he will say anything to get your business. Since you are a potential text book fraud case he will make more money in fees trying to defend you when your creditors dispute this which they will.

Having 45k a year and 100k in credit card debt would certainly raise flags no matter how long you wait unless this was for a dire medical or business emergency. You would be incurring the new debt under false pretenses by giving the creditors the illusion that you have the means and intent of paying when all you're doing is making payments with their money until it runs out. If you made 90k a year and lost income due to circumstances beyond your control that's another story.

I'm not calling you a "scumbag" or anything, but you are trying to screw them over if you are thinking of bankruptcy and maxing out your accounts.

You should look into credit counceling 1st since you have to anyway by law and take it from there. If you still need to file then at this point just stop using credit and stop paying and save cash for everything including a better lawyer then the one you just spoke with.

[nervousSC]

I'm sorry in advance for this BUT.....if we can't ask questions on this board without being called names, or looked down upon, WHERE can we ask them? It kinda makes newbies like me intimidated to ask anything....

I just couldn't keep my "mouth" shut anymore.

(Walks slowly away with head down....)

[Bobby'sGirl]

Since some of us seem to be playing judge...

...and others jury tonight on a lot of posts made this evening (something about hot weather bring out the crabbiness in people???):

Where would you like the line drawn on using remaining credit while still paying on the cards? Buying food? Car repairs? Medical procedures? Dental work? A final trip to say goodbye to your aging relatives since there will be no money available for a while to make the trip happen? A family vacation for stress relief? And when income is so low that you eat or buy your meds with a credit card? All these are scenarios that have played out on many of the posts and in archives since I've been browsing here for the past several months. Be dispassionate, read the posts carefully, point out flaws in what posters may be contemplating BUT PLEASE don't get personal and make us newbies afraid to ask questions, OK?

[enufsanuf]

Thanks...

Finally, a couple of breaths of fresh air from the last two posts. I was starting to feel a little beat up. One of the earlier replies stated they could hardly believe I was asking these questions and that I was in fact being underhanded. I thought this would be a good place to ask these questions seeing that I have no where else to turn except the internet or attorneys (which someone already pointed out will say anything to get my business). Call it what you want, at this point I don't care. I'm not going to keep repeating myself on here because I'm sure someone else needs help. I just want to make sure people go away not thinking I'm some lowly cheat. After almost 15 years of keeping A+ credit, I just wanted to take care of some repairs on my house and home. In case you don't understand yet, I DON'T HAVE THE CASH TO PAY THEM WITH. Did I say that I was going to buy diamonds for my teeth and 24inch rims? I can't use my cards to make the repairs and still pay the minimums. That's why I was going to take the cash advances (which would all go towards keeping up with my payments). I'm not going to do that now and I will seek credit counseling. I'm just like everyone else that's been driven to the point of spending their evenings on a bankruptcy message board...tired, beat down, and ashamed that I have to tell my wife that we might have to do this. Thanks for the help and to the couple of people that understood.

[aa06a47]

From what I have read so far, you just might be trying to hang on a bit longer hoping something will come and save you from your financial problems. The hardest part of deciding to file is to admit there is no other choice.

This is my advice 1) You have looked into credit counseling...won't work, they want more than you can afford, so cross it off your list. 2) Stop charging, don't consider anymore cash advances. If you need a repair on your car, that can be explained, but going from 55k to 100k in credit card charges right before filing will bring the house down on you.

Right now, it appears all your debt is dischargable....don't take a chance on buying time with cash advances which may turn into non dischargable debt or even worse, chance for dismisal of your case.

I think most of us probably whether we knew it or not did things pre-bk to buy some time....avoid the inevitable. You should seek BK very soon. If you need to go a period of time without charges, do so. But start the BK process soon. The way I see it, you really have no option. Charging more / cash advances to buy more time..what's the use?

Your post does indicate your intention is the legal defination of fraud in a bk case. A coin toss would decide if you would ever get prosecuted or lose your bk case because of it. As a person who loves to gamble, I wouldn't get in that game.

Remember, if your chapter 7 you will walk away with no bills. If you've been able to make min payments on 55k all this time, your probably not going to have a problem paying cash to have your car repaired after it is said and done with.