Don't know what to do!! LARGE balance transfer 2 weeks before losing job!

[pinkpeanut01]

We are BROKE. We were blind, dumb, naive, living in la-la land thinking things would get better. I'm in school part-time, stay home with 2 kids during the day. My husband lost his job late 2010 while our newest child was 3 weeks old. We did the cash advance game until he got a new job and income 2 months later. Then we were struggling to make minimum payments, and did some robbing-peter-to-pay-paul. First week of June, I realized our $15K CC balance on AmEx was at 18% interest (I was in such deep denial, I'd rarely even open my statements - just go online and pay the minimum), so I took advantage of a BT offer and moved that $15K to FIA.

Two weeks later, my husband lost his job again. No fault of his own, eligible to collect UC, but now we absolutely, positively CANNOT afford to make our minimums. About a week after he lost his job, I brought up the dreaded B word to him, and we talked to an attorney who recommended Ch7. I have all my paperwork ready to deliver to the attorney to file, but now I am panicking about the balance transfer. We haven't made one full payment to FIA yet (only a partial) since the BT, and I just don't know what to do. We absolutely cannot afford to keep paying our minimums and keep food on the table. I've crunched the numbers... it's not happening. But I know FIA will raise an objection to the BT.

To complicate matters, we have 4 accounts with a credit union, 2 of those being our cars. So with lovely cross-collateralization, I'm at risk of losing both of them if we don't file right away, since I can't afford to pay the minimums on all 4 of those accounts. I can afford the cars and mortgage. That's it. Bankruptcy will protect us from the credit union, but it'll put me at major risk for an AP from FIA, right? I don't know what I'm asking help with... I guess a WWYD? Anybody have experience? Gems of advice? I don't see how we can wait and put time between the BT and filing without losing our cars. And even then, I can't afford the minimum payment if we do wait a few months. Help? Anybody?

[jeep75]

The balance transfer will not effect you. It is very common for people in our position to do exactly what you did right before filing trying to stay afloat.

The trustee may take it away from FIA and spread it among all your creditors.

If you are going to file stop paying the credit cards and keep paying the cars and the house. If you have checking or savings with this credit union, move that to a new account with a different bank so the credit union doesn't take all your money to pay the credit card account(s).

[drowning123]

Yes, open a new bank account and move all your funds there from the credit union. I agree with jeep. Pay what is important. I think you should file for bankruptcy. Don't wait then regret it. You really want that weight off your shoulders. If you don't want to keep the cars, stop paying for those, too. The biggest thing is to not worry about what others will say. Do what you need to do to save your family from future financial difficulties. Good luck!

[jeep75]

Just a little more on the balance transfer, see this post from debee:

http://www.bkforum.com/showthread.php?70984-I-need-your-help-AP-Threat&p=521710&viewfull=1#post521710

Most (if not all) courts have concluded that balance transfers are not fraudulent.

It's very common for people in the months before bankruptcy to transfer high interest balances onto 0% cards. What you did was move the debt around. It's not as if you took a big cash advance and went to Fiji, came home and filed. You didn't. You saw a lifeline in the 0% offer, you grabbed onto it (like a million others before you) and after hanging there for a few months you realized it was too little, too late.

In fact there are cases where the balance transfer was done in the 90 days before debtor filed and the trustee was able to recover the money (as a preference) and then take his share and redistribute the rest equally between all the other creditors. No impact on the debtor whatsoever. No fraud, no problem, no 523.

ETA: If they were to file an AP (remember these 523 threats are common), you will have more power because that is when you get to tell your side to the judge. Once it comes out that you used the money to pay off other dischargeable credit card balances, it will be clear that it's not fraud.

Don't let the balance transfer worry you.

[keepmine]

First of all, did you bring this to the attention of your lawyer?
As to the CU- do you have a plan "B" as far as transportation if they refuse to negotiate the cross-collateralization?
Slow down a little and let's plan this out. Read the entire thread that Jeep75 posted.
Defending an AP is gonna be expensive plus, if you lose you are stuck with the other sides fees.

[IamOld]

pinkpeanut, welcome - there are a lot of wonderful caring and VERY knowledgable people here...I really don't have anything to add other than DON'T PANIC!!! (MUCH easier said than done) - and you're right for not waiting too long...I did that myself and that wasn't...good.

[BKAttyMI]

There's some great information above, but just wanted to say that from your post it doesn't appear you know exactly what the cross-collateralization on your vehicles means. How are you planning on keeping them? Talk to your attorney on this one.

[pinkpeanut01]

THANK YOU. I spent a few hours last night reading whatever threads I could find pertaining to BTs, and I somehow never came across the one jeep offered. So thank you for it. I will read it in detail.

I had a CD with the credit union that I cashed out prematurely and moved to a "safe" bank. One with whom I have never had any credit. It's how I'm paying my atty.

Maybe I am still in denial re: cross-collateral? I have two car loans with Pentagon Federal Credit Union (we are not upside down as far as I can tell, but that's going by Kelley Blue Book), a personal loan, and a credit card. I was hoping (perhaps in vain?) that we'd be able to reaffirm the cars but discharge the rest. If I were to let go of that notion, and come to terms with losing the cars, it would make things a lot easier. We could save those loan payments and buy a junker car I guess...

I spoke to my attorney (or soon-to-be attorney - haven't paid the retainer yet) this morning, and he thinks I should wait 90 days from the BT to file. He also thinks I should keep paying the cars and mortgage. But I don't want to throw money away at the cars if I'm not going to get to keep them anyway. We are in PA and will be using Federal exemptions, and I have more than enough wildcard available to cover both cars, but I guess I'm not understanding how that works if I might lose the cars anyway. I figured I can't just keep paying the cars, but STOP paying the CC and personal loan. That, to them, is the same as defaulting on the cars. Yet I can't afford to pay all four of those things. My attorney says that credit unions are very easy to work with in bankruptcy, but from what I've read online, it seems that Navy, PenFed, and others, aren't so friendly. So perhaps I don't know exactly what the cross-collateralization means. Does it sound like I'm likely losing the cars?

I guess I put a lot of info in one post that perhaps should have been broken up. I'm back to being torn again re: the balance transfer. I was thinking what everyone here has suggested, that I shouldn't wait to file. Just get the show on the road and take my chances, even if it means an objection and settlement. (Though nowadays, these balance transfers are being viewed not as nondischargeable, but preferential?) But now I'm not sure what to do based on my attorney's advice. He said I should pay what I can for the next month or so until I put the 90 days between the BT and filing to show a good effort and intention to pay. THAT seems fraudulent to me, since I know now I will be filing, but I didn't when I took it out. What's the point in putting off the inevitable?

I can't thank you enough for the advice. I am, at least temporarily, somewhat breathing again.

[IamOld]

pinkpeanut that is a question indeed for your atty with that perticular credit union...I have seen others post here that they've kept paying the cars, but discharged everything else - if memory serves, the credit union made wanted them to at least state that they will REAFFIRM the car loans...

[AngelinaCatHub]

Credit Unions are indeed better to work with. Their rules are a bit more tough due to the fact that they in theory are non profit and member owned.

Your transfer is not preferential as you gained nothing and many, many, people have made this mistake in that they could not realize the fact of matter until the fact dawns on them.

It may behoove you to actually talk to the CU and state your dire straights. You certainly are not alone in this economy. (How's that Hope and Change working for all of U.S.?)

To go that 90 day, it would take at least that long before legal action would be suggested. You will have to mentally prepare yourself to ignore the phone.

If you knew all the stupids we did (by ignorance not fraud) you would wonder how in heck we got through all we did. AP and all. You may look up my posts on my profile if you wish. OR, just look at my signature and timeline. You will do fine. Ask lawyer more advice and stop paying on everything you can afford to let go. Many, nice used second cars on every block as others attempt to piece their lives together penny by penny. You are one of many more to come. 'Hub

[BKAttyMI]

Generally, if a vehicle loan is cross-collateralized with a credit card or other loan, they are all "connected". You can not keep one without paying the other. Meaning, if you wanted to reaffirm your CU loan on your car, you would have to reaffirm the credit card as well. It may be possible in your area to redeem the vehicle or work out some other arrangement.

[ValleYum]

It may be wise to ask your attorney about or think about going car shopping before you miss payments and while your credit score is decent in order to get a vehicle that is not "connected" to PenFed.

Good luck!!

[DYLAN150]

What if you have a Home equity line of credit and credit cards at the same bank? Can you default on the credit cards only?

[pinkpeanut01]

What if you have a Home equity line of credit and credit cards at the same bank? Can you default on the credit cards only?

I *think* I actually know the answer to this one. Banks don't typically cross-collateralize, only credit unions. So you should be OK. Unless you have a CU and not a bank.

VY - Thank you. I think I will. After I pay the retainer and return the engagement letter. I think he's getting annoyed answering my questions when I haven't done that yet. ;)

BKAtty - Thank you. I thought that's how it worked, but in my mind, I was holding out hope I could reaffirm what I wanted, and not all. I'm doubtful that'll actually happen though. My atty is not familiar with PenFed, but we don't live anywhere near a branch. I did all my banking with them through the mail and online. He only knew about local CUs' typical responses.

Hub - I will definitely read some of your posts later this evening when the kids are in bed. It's (somewhat) nice to know we're not alone, but I still feel like such a failure. Where's my bailout? ;)

And a genuine thank you to everyone else who responded that I didn't personally thank. I have a feeling I will be here for the long haul.

[kornellred]

Wow - I would have thought that balance transfers were a thing of the past. You need a fairly good payment history for a bank to offer to assume your unsecured debt.
Anyhow - in a balance transfer, the risk is assumed entirely by the bank. It means nothing to bankruptcy trustees.