Maxing out Credit Cards

[barkley]

What's the law on Maxing out your credit cards prior to going bankcrupt? I live in Los Angeles California.... I heard you have to wait 3 months so no flags are raised (or anything that was purchased prior can ordered by court to payback). I had 8k available credit and I used it up in the last month, is it better to go bankcrupt in January (3 months) or can I just do it now? Thanks in Advance!

[bluesky]

...I'm not sure but that looks like fraud to me, maybe someone will have a different take on it. Trustee may want to know where that 8k went in a months time, even if you can get away with it, stuff like that makes it look bad for people with legitimate financial issues and need BK.
not saying you don't need it but why use up what remaining credit you have in a month then look to file?

[barkley]

I was NEVER late once in 9 years of paying $1,000 a month (credit was always between 760 and 800) I payed pack what I purchased... AND MORE! Divorce put me in over my head and lost hours at work, I know whah whah whah but it's reality! I just thought I needed to buy some clothes that would help me out the next 10 years. At first I felt uncomfortable but then I thought about how much interest i paid the last 9 years and I slept like a baby, Well kinda ;)

The question is how the hell does the CC Co. sleep at night knowing they charge so much interest!

[bluesky]

if the 8k in purchases was for living expenses and items you need then your lawyer should advise not to worry about it.

[frogger]

The question is how the hell does the CC Co. sleep at night knowing they charge so much interest!

Actually, the question is your state of mind when spending the 8k on your credit cards. If you had all intentions of maxing out the cards and no intentions of paying them back, then that smells like fraud to me.

[HHM]

You better make some minimum payments on those cards during that 3 months.

The 3 month rule is about burden of proof.

If you have excessivley charged your creditor cards within 3 months of filing BK, the court "presumes" the charges were fraudulent, the burden is on YOU to prove the charges were not.

When you get past the 3 months, the burden shifts to the creditor to prove the charges were fraudulent (which means they have to show you were insolvent at the time and had no intention and could not have paid back the debt).

Although 3 months is the general cut off, you can still be tagged for fraud outside the 3 months.

Unless the charges were for absolute necessities, you have pretty much admitted to fraud

[barkley]

You better make some minimum payments on those cards during that 3 months.

The 3 month rules is about burden of proof.

If you have excessivley charge your creditors within 3 months of filing BK, the court "presumes" the charges were fraudulent, that burden is on YOU to prove the charges were not.

When you get past the 3 months, the burden shifts to the creditor to prove the charges were fraudulent (which means they have to show you were insolvent at the time and had no intention and could not have paid back the debt).

Although 3 months is the general cut off, you can still be tagged for fraud outside the 3 months.

Unless the charges were for absolute necessities, you have pretty much admitted to fraud

Yeah I will pay my Minimum for 3 months which will be another $4k...URGH! just didn't want the court to force me to pay it back! Thanks!

[jribe]

as long as there are no luxury purchases on the cards you should be okay. Did you spend it at muiltiple stores?

Also- i would recommend paying for maybe 2 months; then put some time in between - with no payments. Even if you get sued by someone- you can included in your BK then, or do an emergency filing.

As an example; i haven't made any payments since jan 09 and no one has sued yet *knock on wood *

There's been letters and calls- but nothing more. Besides the fact that even if someone sues- you typically have 30 days to respond - (enough time to file).

Good luck

[StartingOver08]

Buying $8000 worth of clothing in the last 30 days does not sound like living expenses.
I'm not judging you - just saying what it looks like.


Take back what you can - pay for a min of three months - wait even longer to file if you need to file BK. Check your actual budget to see where you are financially to see if Bk is the right thing for you.

[momisery]

The thing is who knows that they are going to go BK? WE used our cards to buy daily things, but we also went out west because my 90 year old dad was having surgery. We bought a few things while we were out there. At the time our rental in GA was rented out, but we were trying to do a short sale or a DIL. We did not think we would have a problem doing that. Hubby was doing a bit better at work, and it looked good to us. Eternal optimists I guess. Anyhow, his job crashed in sales and then so did his income. We thought WF would give us a DIL at least since we had spent all our savings including a smaller 401K the only one we had. But, WF did not, in fact they finally decided to turn us over to an attorney and they finally threatened collection. We would have tried to make it somehow, but at that point we were PISSED. Then hubby got sick, and mecial bills too. I think the financial world got itself in raising rates, not taking short sales, just not helping people at all after they took the bail out money. Now, I don't care.. simply don't care... they can have it all... I want out of the human race as it is known. America is all about ripping each other off now. We don't have any mfg left, so the jobs are cheating each other for finance companies or retailers. I am sick of it all.

[2Bshinyandnew]

Just my personal experience thus far with 2 close family members who have filed chapter 7's in the last 6 months or so.

Both my family members, one in Florida the other in California had what I thought were issues that should have flagged them for fraud/abuse etc. Both family members, from opposite ends of the country were advised by their attorney's that 2Bshinyandnew is worrying too much and to go ahead and file.

One family member in Florida had a new BofA line of credit that he opened 6 months before filing for $10K, he borrowed the full amount, and never made a single payment on it. He filed 3 months later and was discharged on time and closed. Not a peep from BofA.

The other family member, in California, used credit cards for daily incidentals right up until the day he filed, little stuff like Dinner for 2 at Fridays, but still. I was like . He was current on payments until filing. His lawyer said no worries and he was discharged last week. Not a peep from any creditors.

I'm not advocating fraud here, I'm telling my personal experience. Both family members listened to their lawyers.

I would advise the OP to get a few attorney consults. If these are accounts that the OP has had for many years, I'm guessing, in my non-lawyer opinion that she would be OK discontinuing monthly payments soon, maybe make one more payment and then quit, waiting at least 3 months to file. The more time you can put between filing and your last charges, the better. I don't personally think making another $4K in minimum payments will take any possible heat off you, but waiting 3,6,9 months sure will. JMO

[DGranny]

I don't know if it's 'fraud' that Barkley is thinking about perpetrating, but it sure doesn't sound fair to legitimate BK filers like myself who have truly fallen on bad times and HONESTLY need to file for BK.

I am a qualified injured worker from a profession that paid me about $140,00 per year since 1980, until I could no longer perform the job I loved so much, in 2003. In Feb. 2007, my doctors determined that I would never be able to do that job again. I then filed for a medical disability retirement from my employer, only to be told that because of a 'loophole' that favored the employer who I had worked for for some 23 years, that I wouldn't be granted a medical retirement.

As well, being in California, you know how our famous governor screwed up workers' comp for injured workers. So, unfairly, I haven't received one red cent from workers' comp since May 2007. In Dec. 2005 I purchased what I thought would be the retirement home I had worked so hard so many years for and paid $504,000 for it, not knowing the difficulties I would face with medical retirement and the delay in a workers comp settlement. Yeah, it is only worth about $250,000 today. That really hurts because I literally put $225,000 cash money down on it because I didn't want a huge house note.

In the meantime, since 2007, I have gone through ALL of my savings and about $90,000 from a B of A HELOC, paying a $2,700 a month house note, a $650 a month car note, $875 a month healthcare premium for myself and my 'student' daughter -- I have been widowed since '96 -- utilities, etc., and so on and so forth, no luxuries.

AND, instead of running up CC debt as Barkley (and some others on this site) plans to do, I paid all of my CCs off May of 2008 and, thus, have no CC debt at all. Basically, I have no, nada, zero income currently and have been relying on the help of friends and family to help me pay utilities. I haven't paid my mortgage or the HELOC since May of this year and have been without healthcare coverage since then as well. Oh, I also had to sell my 2005 Avalon in July for $9,000, and that hurt because I paid it off last May to the tune of $24,000.

I am awaiting a hearing for Social Security Disability as well as a settlement of my workers' comp claim. I filed for Chapter 7 pro se on 9/14/09, got the filing fee waived because I am truly insolvent, and my 341 is 10/22/09.

If the SSD or workers' comp is not settled before I am foreclosed on, I would not have any money to rent a place (and I haven't rented since 1978, when I bought my first home), pay for moving or even store my furnishings while I live in a homeless shelter. Maybe Barkley could get a cash withdrawal and help me out :-)!!!

Seriously, I know I just came to one of those moments where I needed to vent, not rant or whine. This is a wonderful site and has been immensely helpful to me in filing the Chapter 7 on my own, with the help of Nolo. It's just that I think some of the people on here need to stop and look around and take note that there are many, many other people who are in a much worse position than they are. I mean, I even realize that as bad as MY situation is, there is ultimately someone out there who is doing much worse than I am and am thankful that I am not in their position. PEACE!!!

[2manybills]

Granny: I'm sorry to hear about the tough time you're having and am hoping 341 goes well and you can be on your way. It is tough when you try to do the "right thing" and they've made it impossible to get ahead. Our great state has put so many people in harm's way!! I watching it in our neighborhoods all around us. I'd like to know what the heck they are going to do with these empty houses!!!

Barkley: I'm not sure why you would think you wouldn't be able to buy clothes for 10 years again. As for CC companies, we didn't hear from any. We had some charges for basic living expenses, etc. that totaled $800 on one card and several other random ones the months before we filed. Not a word from anyone. But 8K worth of clothes -- I would definitely return what you can, get credit on your cards, and make 3 months worth of payments. To your benefit our courts are so crowded you should be fine. But I would definitely wait for 90 days and make that minimum monthly payment during that time.

[sigferl]

Thanks for your post barkley. I am not sure you really want a answer to your question about how the business people at CC sleep...

CC charge high interest because soooo many people default on their loans, just read the post on this and many other boards. I suggest you start a CC business and charge lower rates because I would definitely sign up but I think you too would be charging high interest after lots of people stopped paying.

I am glad that I do not have the shopping gene, hard work and frugal living gives me that wonderful 'shopping' feeling without the hangover.

God Bless America

I was NEVER late once in 9 years of paying $1,000 a month (credit was always between 760 and 800) I payed pack what I purchased... AND MORE! Divorce put me in over my head and lost hours at work, I know whah whah whah but it's reality! I just thought I needed to buy some clothes that would help me out the next 10 years. At first I felt uncomfortable but then I thought about how much interest i paid the last 9 years and I slept like a baby, Well kinda ;)

The question is how the hell does the CC Co. sleep at night knowing they charge so much interest!

[sigferl]

Thanks for your post DG. I definitely agree with your post and thanks for presening it so well.

Vote Libertarian.

I don't know if it's 'fraud' that Barkley is thinking about perpetrating, but it sure doesn't sound fair to legitimate BK filers like myself who have truly fallen on bad times and HONESTLY need to file for BK.

I am a qualified injured worker from a profession that paid me about $140,00 per year since 1980, until I could no longer perform the job I loved so much, in 2003. In Feb. 2007, my doctors determined that I would never be able to do that job again. I then filed for a medical disability retirement from my employer, only to be told that because of a 'loophole' that favored the employer who I had worked for for some 23 years, that I wouldn't be granted a medical retirement.

As well, being in California, you know how our famous governor screwed up workers' comp for injured workers. So, unfairly, I haven't received one red cent from workers' comp since May 2007. In Dec. 2005 I purchased what I thought would be the retirement home I had worked so hard so many years for and paid $504,000 for it, not knowing the difficulties I would face with medical retirement and the delay in a workers comp settlement. Yeah, it is only worth about $250,000 today. That really hurts because I literally put $225,000 cash money down on it because I didn't want a huge house note.

In the meantime, since 2007, I have gone through ALL of my savings and about $90,000 from a B of A HELOC, paying a $2,700 a month house note, a $650 a month car note, $875 a month healthcare premium for myself and my 'student' daughter -- I have been widowed since '96 -- utilities, etc., and so on and so forth, no luxuries.

AND, instead of running up CC debt as Barkley (and some others on this site) plans to do, I paid all of my CCs off May of 2008 and, thus, have no CC debt at all. Basically, I have no, nada, zero income currently and have been relying on the help of friends and family to help me pay utilities. I haven't paid my mortgage or the HELOC since May of this year and have been without healthcare coverage since then as well. Oh, I also had to sell my 2005 Avalon in July for $9,000, and that hurt because I paid it off last May to the tune of $24,000.

I am awaiting a hearing for Social Security Disability as well as a settlement of my workers' comp claim. I filed for Chapter 7 pro se on 9/14/09, got the filing fee waived because I am truly insolvent, and my 341 is 10/22/09.

If the SSD or workers' comp is not settled before I am foreclosed on, I would not have any money to rent a place (and I haven't rented since 1978, when I bought my first home), pay for moving or even store my furnishings while I live in a homeless shelter. Maybe Barkley could get a cash withdrawal and help me out :-)!!!

Seriously, I know I just came to one of those moments where I needed to vent, not rant or whine. This is a wonderful site and has been immensely helpful to me in filing the Chapter 7 on my own, with the help of Nolo. It's just that I think some of the people on here need to stop and look around and take note that there are many, many other people who are in a much worse position than they are. I mean, I even realize that as bad as MY situation is, there is ultimately someone out there who is doing much worse than I am and am thankful that I am not in their position. PEACE!!!