$76,000 in credit card debt...NOW WHAT?!?

[LifeInCA]

Hello
So nice to find this place! I have few questions, simple ones I hope. I doubt there is one set answer, but some guidance would be helpful, even if not legally 100% for sure.

1- If someone wanted to make sure that their bank statements and credit cards statements were not looked at/scrutinized when declaring Ch. 7 or Ch. 13, how long would they need to wait before declaring BK? Is there even a 'safe' time frame? I am not asking this to perpetrate fraud on CC companies, but having statements looked at could cause problems in another area that I would prefer to not go down the road on. Best to just avoid opening "pandoras box" if possible, that is why I ask.

2- If you are going to wait to declare BK to 'age' accounts as I have read here, what happens while you wait? Do you have to keep paying you minimum payments? What if you can't? (we can't keep paying, that's the issue..or we WOULD keep paying them!!)

3- What happens/may happen, if anything, if you just stop paying credit cards but don't declare BK?

Some info in case it matters/helps:

We are in So. CA.

We have reached $76,000 in credit card debt over 3 years. Just living expenses, nothing luxurious, no vacations, furniture, vehicles etc.

Spouse unemployed since 4/09. I have been disabled due to car accident in 5/09. Neither of us have worked since then.

Spouse receives $1,644/mo unemployment currently. Ends in 6 weeks. If he doesn't get a job by then, we will really be in DEEP doo doo!!

I received state disability until 5/10. Now receive nothing. Waiting approval for Social Security Disability, but may take another year or more to get it.

So..currently our only income is $1,644/mo.

An older son was helping us with $400 a month but he too is now unemployed (since Jan. 2011) My mom may be able to start helping with $400 a month soon.

We have a first & second mortgage totaling $2,272/mo (owe about $280,000 still). Car loan of $258/mo (one year left). Cobra health Insurance premium of $1,038 (for 2 people!!). Minimum payments on the credit cards is currently $1,776. And of course we have general bills and costs of living.

Even with all that, I maintained a credit score in the high 700's until just recently. (dropping due to debt ratio only) I had NEVER, EVER been late on my cards until recently, and have still never been 30 days late. I have never missed a car or mortgage payment. Not that it matters..but at least I did do "something" right!!

We have an 18 year old son at home still & in high school. He has a 1 1/2 year old son who spends 50% of his time here. Our 22 year old also lives here, as well as my 84 year old mom.

We have no savings, $10,000 in a 401K, 2 cars (03 Camry & 05 Matrix), and about $75,000 - $100,000 max in home equity. Only own one home, been here since early 90's. Own no other property.

As of February, we are still using credit cards to pay bills etc. I know we will need to stop, and will have to if we can't make March minimums. Can't pay the bills without credit cards, and can't pay the minimum payments on the credit cards. What a MESS!

I don't know if BK is a solution for us or not. I don't know if we have any other options. I just know that every resource that I used to keep us afloat this long is used up. There is nothing left to do but GIVE UP! I hope to borrow enough money from relatives or by recycling (or panhandling/begging on the street!! LOL) to make the mortgage payment for another month or two while we figure out what to do, and see if spouse gets a job that will at least pay the mortgage. As for the rest of the bills, especially the credit cards, I just don't know.

Thank you for reading this far...any insight or guidance you can offer would be appreciated. Please just don't berate me for getting into this situation. I am one of millions going through this. I did what SEEMED like the right thing to do at the time to survive. I had/have every intention of paying back what I charged.

LifeInCA...

[BrokeinMD]

Welcome to the forum! Life, you're not going to find any berating here. We've all walked in shoes similar to yours. I did the Peter/Paul thing with the CCs when I was unemployed in 2005 and was out of work for nine months. Now my Sig Other has been out for 7 months. We've never caught up financially, and I had over $90k unsecured debt, so that's why I'm here! Generally, Trustees do a 6 month look back. Any large purchases on credit cards are scrutinized going back 90 days. Bankruptcy Attorney consults are mostly free, so do a little shopping for an attorney until you find the one that's right for you. There's a lot of Californians that post on here that can help you with California specifics, and there's also a BK Lawyer Directory tab here, too, to give you a starting point. You'll learn a lot here, and these forums give you an outlet to talk to when "no one else can know or understand." You'll even be amazed, like I am, at the pro se filers who go about such a complicated process and succeed. Best of luck to you, whichever way you go, and know you're not alone!

[minan]

LifeInCA...we're in So Cal also. Long reply but it's to share our experience.

We filed 13 due to back taxes from self-employment. Long story short: Thought we could catch up one day, did have a payment plan with IRS and paid on time each month. Incurred new tax debt for 2009 that made us realize we were in over our heads and IRS issued a levy after the new debt. The levy caused us to be late on our credit cards, which lead to cc's increasing interest rates to the max, some went up to 29%. Then we looked at the numbers to determine what we could do. Options were running out. If we tried on our own, then we would be well into our 70s before our entire debt would be paid off due to the continually accruing interest (on all the debt) and the penalties (from the IRS). Yuck. At this point, Chapter 13 looked to be the only option. We never considered 7 as we wanted to pay back our debt. Took 2 weeks of lots of tears, stress, no sleep, constant worry, constant numbering crunching to finally realize and accept that we had no other option. We filed last summer and are awaiting confirmation.

Not going to lie: it's the most stressful situation, lots of tears have been shed, lots of sleepless nights, some days are good, some days are bad, your self-esteem is so damaged, you feel hopeless and worthless. Still hard to see the light at the end of the tunnel. This forum has been a godsend.

Read, learn and apply to your situation. One thing we learned: You need to look at BK as a financial tool. It is a legal option available to us. It has also lost a lot of its stigma because of the economy and housing crash more people are filing. We keep telling ourselves that in 54 months (we've made 6 payments so far), we will be debt free except for our mortgage and student loans.

Do we feel guilty? Only about the taxes, but our main goal is to pay back the tax debt. After the way the credit cards treated us, we have no sympathy for them. We paid on time for years and the one-time we were only 30-days late, we learned exactly how much they really cared. So no guilt there. Same thing to our credit union. We were loyal, made all our payments on time, but when we late once, we quickly learned they didn't give a damn about us. So no guilt there either. Everyone is going to get paid something in our plan so that's also why we don't feel guilty.

This week has been a bad week. Sometimes it doesn't take much to trigger it. This week was an email from atty asking for info to respond to Trustee's objections. Haven't been able to sleep, cried alot...so it is hard. This forum helps though. Use it. Good Luck!

[LadyInTheRed]

Hello
So nice to find this place! I have few questions, simple ones I hope. I doubt there is one set answer, but some guidance would be helpful, even if not legally 100% for sure.

1- If someone wanted to make sure that their bank statements and credit cards statements were not looked at/scrutinized when declaring Ch. 7 or Ch. 13, how long would they need to wait before declaring BK? Is there even a 'safe' time frame? I am not asking this to perpetrate fraud on CC companies, but having statements looked at could cause problems in another area that I would prefer to not go down the road on. Best to just avoid opening "pandoras box" if possible, that is why I ask.

Under Bankruptcy Code Section 523(a)(2)(C), debts over $500 per lender for luxury goods or services within 90 days before filing are not dischargeable. Either are cash advances of $750 within 70 days of filing. It is often recommended to wait 90 days after the last use of CCs to file, but that doesn't mean you will have problems if you file sooner. Waiting 90 days is also not a guarantee that nobody will object to discharge of a certain debt if they think they can prove that you incurred the debt under the circumstances listed in Section 523(a)(2)(A) and (B) at the same link as above. (basically debt incurred by fraud or false pretenses.)

The only person that looked at my credit card statements was my lawyer and that was just the most recent statement so he could confirm the balance and the creditor's address. I don't think you need to worry about your CC statements being examined unless a creditor objects to discharge of its debt, you fight the objection and the statements become evidence.

My lawyer did send my checking account statement for the month in which I filed BK to the trustee. Some trustees ask for statements going further back to look for large withdrawals or transfers that may show the debtor is hiding assets.

2- If you are going to wait to declare BK to 'age' accounts as I have read here, what happens while you wait? Do you have to keep paying you minimum payments? What if you can't? (we can't keep paying, that's the issue..or we WOULD keep paying them!!)

If you can't pay your living expenses and your CC payments, you need to pay your living expenses. It is usually recommended that you stop paying on CCs as soon as you know you will be filing BK. However, there could be exceptions if your attorney is worried that a creditor may object to discharge. Consulting with a few BK attorneys will help you determine whether there is something to worry about in your particular case that would justify making a few more payments on CCs.

3- What happens/may happen, if anything, if you just stop paying credit cards but don't declare BK?

Your phone will start ringing as your creditors try to collect. Eventually, some creditors may file lawsuits. But, they may not. If a creditor sues and gets a judgment against you, they can then collect by garnishing your paychecks, levying your bank accounts or recording liens against your property.

You may be able to settle with creditors for less than you owe. But, you usually have to have cash available for settlement. If you have many creditors, getting them all to settle may be difficult and you could end up having to file BK after wasting money settling with one creditor and finding another wouldn't settle. If you do settle, make sure you get in writing that the settlement is in full satisfaction of the debt.