Accumulating Cash Before Filing BK by not Paying Creditors

[Kristy12]

I like the idea of not paying my unsecured debt for 12 months but I'm worried about collecting too much cash prior to filing. I don't plan on filing until 2014, so if I don't pay my credit cards for 12 months, I would have quite a nest-egg to spend before filing date. Some say use the nest-egg to pay the attorney in full prior to filing but others say never pay the attorrney in full until after discharge. If I'm not filing until 2014, due to layoff/forced early retirement in 2014, should I continue to pay my credit card bills for the the next six months and then stop six months before I file? I just don't think I can, as a single person, spend that much filling my pantry or buying new tires, etc., before the filing date. On the other hand, I don't want to throw good money after bad when I don't need to.

[keepsmiling]

How much are we talking about? Which exemptions are you planning to use? What are your other assets?
There are probably better things to spend your money on. Give us more info and we'll brainstorm with you.
You might consider a down payment on a car, bearing in mind your exemption amounts. Also.... do you need glasses? life insurance? roof repair? other things you have probably been putting off due to lack of funds?

eta.... you might want to start a new thread to discuss this. This one is pretty old.

[lillymarlene]

March 2010, I received a summons from Capital One, one of my smallest creditor balances, about six months after not paying. However, in Massachusetts, it seems that the first summons is usually for the "pre-trial" and I had to appear in court about 4 months later. Then shortly after the "pre-trial," I received another summons for the "trial," which would have been in November of that year.

I suppose if you want depending upon your area, you can really drag things out.

[ksgirl38]

I like the idea of not paying my unsecured debt for 12 months but I'm worried about collecting too much cash prior to filing. I don't plan on filing until 2014, so if I don't pay my credit cards for 12 months, I would have quite a nest-egg to spend before filing date. Some say use the nest-egg to pay the attorney in full prior to filing but others say never pay the attorrney in full until after discharge. If I'm not filing until 2014, due to layoff/forced early retirement in 2014, should I continue to pay my credit card bills for the the next six months and then stop six months before I file? I just don't think I can, as a single person, spend that much filling my pantry or buying new tires, etc., before the filing date. On the other hand, I don't want to throw good money after bad when I don't need to.

Every attorney I saw required payment in full before filing. You can also prepay some of your bills. You can prepay your auto insurance and if there are any other expenses you are putting off - car repairs, medical or anything similar you could do those prior to filing. Another option is to open an IRA or increase what you add to your 401K. I can think of another option too.

[keepsmiling]

The IRA an 401k may not fly.
One atty we spoke to required a partial payment before filing and another before the 341.
Again, this should probably be a new thread.

[ksgirl38]

The IRA an 401k may not fly.
One atty we spoke to required a partial payment before filing and another before the 341.
Again, this should probably be a new thread.

I'm sure I've seen people on this forum discussing putting their money into an IRA before filing to "protect" it. I prepaid most of my bills by a couple months prior to filing and it wasn't an issue.

[LadyInTheRed]

Kristy12, I moved your question to its own thread.

Will you be filing a Chap 7 or 13?

[LadyInTheRed]

I'm sure I've seen people on this forum discussing putting their money into an IRA before filing to "protect" it. I prepaid most of my bills by a couple months prior to filing and it wasn't an issue.

Yes, it has been discussed here, but it should not be done without consulting an attorney. It could be viewed as a fraudulent transfer that the trustee can petition to void under 11 USC § 548.

I did a little research on this, and it appears to be an unsettled issue and may depend on state law and the facts of the case. Here's an article on a case that ruled in favor of the debtors, but the author of the article believes the court had a lot of sympathy for these specific debtors that it may not have in other situations: http://www.forbes.com/sites/jayadkis...imilar-device/ Note that the case discussed is a district court ruling and does not create precedent that other courts must follow. But, it is a good discussion of the issue of making transfers to an IRA as part of bankruptcy planning.

[keepmine]

Some states do have limits on the amount of time that must pass between an IRA contribution and bk filing in order for the contribution to be exempt.

[Floridagail]

When I decided to stop paying my cc debit, knowing I may have to file , I started advance paying my car insurance, health insurance, I was hoping after paying my cc for over 20 yrs getting nowhere, they would just right me off, I had also been on a debt repayment plan, borrow from 401k, done the whole yards. I almost made it, I went 18mos before Cap One sued me. So I would stop paying and get a dependable new car before filing, cause it may be awhile to get a new car. Save to pay attorney off. No attorneys down here will even start a bankruptcy without full pmt.

[Kristy12]

Thank you all for your help. Currently, I am up to date on all of my bills, mortgage, etc. Of course that means I'm not eating and am charging my gas to get to work.

I am so afraid of not paying my bills. My family was very poor when I was growing up, and that experience is not something I want to live through again.

Everyone's compassion here is much appreciated.

[LadyInTheRed]

Kristy12, if you are having trouble paying your living expenses without using credit cards, you should definitely stop paying unsecured creditors. Feeding your family and getting to work so you can continue to bring in income is more important than paying credit card debt. There is no time like the present to do whatever you have to do to stop depending on credit cards. Your creditors cannot hurt you.

[keepmine]

It's pretty standard advice around here to stop paying all debt that will be discharged in bk and use that money for normal household expenses, legal fees,etc.

[tobee43]

also in our case we used what money we had for moving expenses which were substantial since we moved out of state. not because we had a lot of items to move, but the costs related to the move. we were never asked about what we did the money since we were not paying our bills...actually we had also rec'd an 8k tax refund that our atty said to spend immediately, we did and again the tax refund was never even mentioned, we did use it for living expenses, as well to fix the car from head to toe, stocked up on food and laundry and household good supplies.

we stopped paying everything when it was exactly 90 days prior to our filing date. and, as lady points out feeding your family and assuring their needs is a top priority, not paying your credit cards.

we paid our atty as well from the income we had coming in. since the income was not work related income it was a bit easier to justify just in case the trustee asked. actually the trustee asked what we did for a living and why we not were working, how our job searches were going, etc, this is sticks in my mind to this date when i told her what i did she said OH! NO! you'll not be finding a job around this area anytime soon! wow. my REAL point here, is i think unless your balance sheets are off the wall and you have a decent trustee and you are being honest (that's really the key) you will be alright.

[keepsmiling]

Kristy, we know it's nerve wracking.... but only the first time.

If you are filing, stop paying the cc's. You are Bankrupt and can no longer afford to pay them. Harsh reality but it is what it is. Heck we are all there with you in the same boat. Pretend we are holding your hand. Because we are, in the best virtual way, and we have your back.

But prepare yourself first by getting Google Voice and printing out any statements you don't currently have. Eventually your access will be blocked.