Preferential Payment

[AreSoonParted]

Now that BofA has swollowed MBNA my minimum payment has gone from about 450/month to about 800/month. They cranked my rate up to 19.99% even though I am still current... anyhow, is this a preferential payment even though I am paying the minimum?? I think I've made my last payment either way, but will this cause any trouble?? or is it between trustee and BofA ?

Thanks.

[CATCHMEIFYOUCAN]

have you filed Bk yet ??? if not than stop paying (throwing good money after bad) if you are planning on filing ??? sopposedly anything $600 or more is considered "preferential." it is up to the Trustee to after the creditor for "preferential" payments. Regardless of the "minimum," the creditor is trying to bill you for, i would think if you pay "$600" to one cc and not the other cc, it might as well be a "preferential" payment! im sure others will chime in here to lend helpful knowledge. when i filed BK i was up on all my payments until the day i filed and i wish i hadn't "thrown good money after bad!"

best of luck, catchme if you can

[jal1129]

hmmm...now I may not be correct on this but I think preferential payments are for payments that are not regularly scheduled payments. For example your minimum payment is $400 and you decide to send in $800, not good. But if your required payment is $800 I think your okay. Unless of course the only cc your paying is BoA then that could cause a problem.

[whatamess]

Bofa

The same exact thing happened to me with BofA/Mbna. My minimums were over the tp on three lines of credit. My interest rae went up to 23% Now I'm late and they are tough to say the least.
I was told that my payments to them would be considered preferential because I was paying them $700 a month-$800. Over three months that would be $2,400, and my other ones were aounf $300 over three months.
WAM

[lrprn]

According to the Moran Law website at http://www.moranlaw.net/preferences.htm:


You can pay anyone you want anything you want before filing. It is up to the trustee and courts to decide if the payment(s) you made were preferential and if they want to go after the payment(s) you made to spread the cash equally among all your creditors.

See http://www.expertlaw.com/library/ban...e_defense.html for an excellent explanation of how the courts define and deal with preferential payments.

[AreSoonParted]

Thanks to all,
I'm probably going to file in about 90-100 days. I hate throwing good money after bad, but I'm trying to keep things on an even keel until I file.. However, I think BofA has gotten their last full payment. I've spent most of the last year trying to wait and see if my income would fall below the median, or get close enough to do a Ch7 I get about 15-20% of my compensation in bonuses. I'm about 400 a month over the median now. The Atty is really on the fence on which way to go (Ch7 vs Ch13) . My income is over the limit, but I have somewhat higher health expenses because of a kid w/ some spinal problems...We're waiting for more tests and to see if therapy helps. Don't want to file and then find out I have a big giant medical bill come due!!

So....anyhow, one way or another this will resolve itself in the next few months. This waiting and watching and estimating is a real drag...

I haven't used my CC's since Nov-Dec. I'm now pretty resigned to going Ch13 so am going to try and get a few things around the house done beforehand,
make sure everyone's clothes situation is good, and maybe even buy a new tent and camping equipment, because it sounds like a Ch13 that's about all the vacations I'll be doing for a while. Fortunately in Colorado I have lots of outdoor recreation chances available.

Boy. I guess I got to rambling here..Anyhow, thanks for the info.

ASP

[twuoo]

In terms of not throwing good money after bad to pay credit card minimums....how does it look if I've been paying the minimums all along and then stop paying them, but I can't file bk until say Sept/Oct because I want to wait long enough after I stop using the cc? Any advice would be appreciated! Or should I continue to try to pay the mins due until the 90 day window, say stop paying in July/Aug?

[SinkingFast]

Everyone handles the payments issue in their own way, Twuoo.

Some folks pay right up to the day they file.

Some folks can't keep up the minimums. They go ahead and convert to a "Cash and Carry" lifestyle months, even a year or more, before they file.

You have to consider your own situation. What you can and cannot do. Don't allow Credit Scores be a part of the equation. Just decide what works best for you and your family, and that's what you do.

[CindyLou]

I converted to cash and carry two years before I filed. I had many questionable charges, cash advances, etc and wanted to put as much time as I could between usage and filing. I had decided I would file either when I was in true danger of a judgement or before the law changed. I ended up filing the day before the new law. I was able to change my lifestyle beforehand and stop paying those payments. The rule of thumb I would use is either pay them all at the minimum( which makes not senses if you are going to file) or don't pay any of them. It becomes preferrential is you pay one of them more than the min. OR if you pay one of them the min. and others nothing. If you are going to file STOP paying.

[twuoo]

My worry is that if I stop using the cc and at the same time stop paying the mins, wouldn't it look super suspicious in terms of fraud. Even though I'm not charging for luxury items etc, I am using them for food, daycare expenses, gas. My one big ticket item will be to pay for some home repairs, which will be less than $1500.

After that, I hope to be able to stop using the cc by end of May. I've already been paying the mins for over a year now. But it's time to stop the bleeding.

Thanks for the helpful responses.

[CindyLou]

Stop paying!! It is a waste of money if you have decided to file. Once you decide, do not use them again. Your attorney may suggest you wait 90 days to file, but the collection process will not have made it to lawsuit level in 90 days. Don't waste your money!!!!!

[CATCHMEIFYOUCAN]

paying the minimums

In terms of not throwing good money after bad to pay credit card minimums....how does it look if I've been paying the minimums all along and then stop paying them I payed my minimums sometimes below just to keep them "at bay," until the the time had come to file. I kept up because I used my cards mostly for cash advances and didn't want to run the risk of "presumption of abuse," I was also ABLE to keep up because I would have money I won from the casinos to keep up, but I can't file bk until say Sept/Oct because I want to wait long enough after I stop using the cc? Any advice would be appreciated! Or should I continue to try to pay the mins due until the 90 day window, say stop paying in July/Aug?

[twuoo]

So how does this game plan look to you folks....

I need to hit the cc once or twice more for home repairs. Then pay the mins for another month. After that, go to just using my cash to buy stuff. My credit score will no doubt bottom out But then file around Sept/Oct.

Does that seem reasonable or does it not even matter that I make the mins next month after I used the cc to pay for stuff?

Thanks again!

[CindyLou]

technically, once you decide to file any use of your credit cards would be considered fraudulent, no matter what the reason. Waiting only shifts the burden of proof to the credit card company. But in the end you have to do what you have to do. Worse case scenario you could have to pay back some charges outside the BK, but chances are they would slide through. Good luck with your BK. Paying the minumums or not paying the minimunms really has no bearing on the situation, in my opinion.

[DeadManCrawling]

So how does this game plan look to you folks....

I need to hit the cc once or twice more for home repairs. Then pay the mins for another month. After that, go to just using my cash to buy stuff. My credit score will no doubt bottom out But then file around Sept/Oct.

Does that seem reasonable or does it not even matter that I make the mins next month after I used the cc to pay for stuff?

Thanks again!

Our attorney has us doing this:

STOP paying credit cards.

DO Home repairs. We have an AC unit that should have been replaced 3 yers ago and is on the verge of utterly giving up the ghost. Every summer.

The money we are saving on CC minimums is similar to yours, perhaps higher. We will save nearly 6-7k over a 2 month period by not paying minimums. Instead of paying THEM, we are paying US, in the form of a new AC unit.

Also, this accomplishes another thing, by allowing us to make this purchase with cash instead of a CC.

Abuse? Attorney says no, as it's not on a CC.

A lot of money, but we have been only able to make the "interest only" option on our mortgage. This way, it will be shown as exactly what it is-an emergency home repair. Not CC abuse.

Can't go without AC in Florida with summer coming on soon.

Your credit score will bottom out? Have you checked the credit agencies? I was astonished when, in a very similar situation, I actually bothered to look. If you are concerned about your credit score, it's too late, likely.

No matter what your BK will bottom out the score. But that's really the point. Mine was 467 when I checked-I am used to seeing it above the 780 range. I had been 1-2 days LATE on 2 payments for the same card. They use predictive modeling analysis and behavior modeling programs to "guess" when you will bottom out. Likely thay have already accounted for your chargeoff in the next quarters tax records.

Why let them have that long?

Stop paying, get the inevitable underway.

This was one of the most difficult things for me to grasp. We are not failures, we are the people who realized how vicious the circle got, how desperate it was possible to be, in hard times, or in times of a little need. For us, it was a big change in income, coupled with no similar change in credit and spending habits. We rode that wave for 3 years before it was unsustainable.

I am so glad we woke up. No one will ever earn a dime interest off us again, after this.

If you really wanna do some amazing math, calculate your purchases of the last few years in one column. Then calculate the interest paid in the second column.

For us, it worked out to be nearly $200,000.00 INTEREST on purchases of $57,000.00.

I think we've paid our share. Time to get off the Credit Card Treadmill of Doom.