Paying the Bills Question

[reallynervous]

This has been an issue I am curious about...

In our case, we were not able to continue to pay our credit card bills once we depleted our savings. We need all our income to pay our normal monthly bills. We were only able to pay our credit card bills by incurring new charges on the cards (for living expenses). Once we stopped doing that, we had no money to pay the bills.

Are most people that continue paying up until they file using savings money? If not, then how do you get around the disposable income issue? In other words, if you have been able to make payments every month leading up to filing, wouldn't it be viewed as you have money available to fund a CH13 plan of some sort since you have essentially been "able to pay"?

I hope that makes sense.
reallynervous

[Cassiopeia]

I only paid very sporadically a couple of my cc card bills prior to filing. Most of them didn't get payments for MONTHS. And not because of any advance planning of mine about BK, it was simply that I didn't have the money, it was used on basic living expenses.

I'm not discharged as yet so I don't know the ramifications, but I fully intend to repair and rebuild my credit.

[RickInMich]

Yes. A preferential payment is defined as any payment by the debtor totaling more than $600 to any non-secured creditor in the 90 days prior to filing bankruptcy. It's a part of the current bankruptcy law.

lrprn,

Even if the minimum payments are like $500 (on credit card loans)? I really didn't realize this. I'm scared to stop making payments, but I think I'm going to do it!!

Rick

[Keebler]

lrprn,

Even if the minimum payments are like $500 (on credit card loans)? I really didn't realize this. I'm scared to stop making payments, but I think I'm going to do it!!

Rick

We visited attornies in June and reluctantly stopped making payments on the advice of just about everyone we talked to. We also stopped using credit cards at the same time. Part of the transition to bankruptcy has included operating on a cash-only basis and living life within the strict finincial constraints of our income.

Despite feeling like our finincial problem were not so bad, and feeling like the extra money we'd save would leave us rolling in cash and living easy, the transition has been eye-opening!

We had some cash saved to soften the transition and our only real finincial burden was going to be paying the attorney. We chose to wait 90 Days between our last charges and filing, and we figured it would be plenty of time to save up. I also planned on tossing a creditor or two a bone by making a payment if needed to keep them at bay.

Here it is approaching the end of the 90 Days and we still can't quite eek out $1,200 to pay the attorney! Instead, we've paid nothing to our creditors and focused on getting organized by paying the doctors and dentists that have been negleted a bit and generally getting cought up on all of our bills. We're all caught up on the important payments now and we're at a point where we can pay everything on time or slightly early so things are good -- not great. As we approach 90 days delinquent, the thought of sending them even $1 is painful because we can see how tight things really are, and how foolish we had been before!

Also, we've honestly been suprised how slow they have been to report us as delinquent and the phone calls have been managable. I've been able to tell creditors that we haven't paid because we have no money -- and it's the truth!

[keepmine]

This has been an issue I am curious about...

In our case, we were not able to continue to pay our credit card bills once we depleted our savings. We need all our income to pay our normal monthly bills. We were only able to pay our credit card bills by incurring new charges on the cards (for living expenses). Once we stopped doing that, we had no money to pay the bills.

Are most people that continue paying up until they file using savings money? If not, then how do you get around the disposable income issue? In other words, if you have been able to make payments every month leading up to filing, wouldn't it be viewed as you have money available to fund a CH13 plan of some sort since you have essentially been "able to pay"?

I hope that makes sense.
reallynervous

I think you'll find that paying as you go and not using cards uses up a chunk of your paycheck.
What you are describing is basically "robbing Peter to pay Paul" and once you stop that, you'll see exactlywhat it takes to run a household.
I stopped paying 5 months before I filed and it was all I could do to keep the mortgage paid, the lights on and food on the table. Life without credit cards is an eye opener at first.

[RickInMich]

Can I ask you guys if any of you had automatic payments from your checking account? One of the problems for us is all of our bills come directly out of our checking account. I'm curious if after we return to paper bills, could they still try to deduct from our checking account?

Rick

[keepmine]

You're going to need to stop those automatic payments. Once you stop 'em, they can't continue to pull money out.

[Boscoe]

and Rick, they require your authorization to pull money out of your checking account. Like I said before, you should be ok continuing the auto pay for the items you are keeping and want to continue paying, like mtg, auto, utilities. Stop the auto pay on everything else..............if you do this, your checking acct won't be touched.

[Keebler]

I opened up an account at a new Credit Union (www.dcu.org) that has an outstanding Bill Pay setup. Having payments initiated by your bank is much better than giving creditors your Routing and Transit Numbers and leaving it on the honor system for them to use them properly. I've found that the bank has no leverage to deal with unauthorized ACH transactions. Once you've authorized one transaction, there's no good way to argue over the amount or if you agreed to multiple payments -- the bank doesn't know what you've authorized and they'll pay anything that gets presented.

Another problem I found was removing account information from creditors that had previously been authorized for direct payments. Some would let me provide a different account number but few would let me delete the information I had previosuly provided. For the ones that wouldn't give me the choice of withdrawing my information, I entered the Routing and Transit Number for themselves. This way any payments they tried to initiate would get messed up because they would attempt to debit from themselves.

A new account at a new bank is not such a bad idea!

[showboat]

Rick,
I went for almost 2 years not paying any of my credit cards before i finally got sued by discover, and then chase got a judgement through arbitration. I was making payments to discover on their judgement, but when chase got theirs, I decided I had to file bankruptcy.
Before I was able to file chase cleaned out my savings and checking accounts, but since I knew this could happen, There was little money for them to get.
I would assume if the credit card companies have your account numbers, and banks, once they get a judgement they will take whatever is there.

[RickInMich]

Wow, I think I may have to close that checking account. Man, i hate to do that. I've been with the credity union over 25 years now. I wonder if I can put a hold or something on the checking account. I can definitely stop automatic payments on two cards, but I have this sneaky suspicion I had to agree to automatic withdrawals on the two Capital One loans. I think I'll call and tell them I'm having an issue with the bank and I'm closing my account and need to stop the automatic payments and will let them know when I get a new account.

Rick

[KellyBerg]

What difference are lates if the debt is wiped out and the creditor is removed from your file? I don't get that.

Filing bankruptcy already hurts your credit, but having a LOT of late payments, collections, etc really help hurt it even more.

The less late payments and collections you have after bankruptcy helps keep that credit score higher right out of bankruptcy.

But everyone's right, your really throwing money out the door when you pay them and you know your going to file shortly.

But I also wouldn't wait a year to file and let the late pays and collections build up either.....

Kind of a catch 22 - doomed if you do and doomed if you don't situation.