Should I panic now? WHAT SHOULD I DO???

[hkdaisy]

I just received a letter today from an attorney's office dated (1/30/12) stating that one of my creditors Discover Credit card had retained them to represent Discover Bank. He states in the letter, "Based upon a review of this acct...our client is considering filing an adversary proceeding pursuant to 11 U.S.C 523 to object to the discharge of the debt."

"This letter is intended to afford you the opportunity to provide an explanation of the cash advances/purchases before our client makes a final determination as to the filing of its complaint."

Between July 29,2011 to Aug 2011 I accumulated $336 in retail charges.
Between July 29,2011 to Aug 2011 I incurred $3550 in cash advances.

The cash advances I took out went to pay late rent and utility bills. I had no more unemployment and depleted my all my savings.

I am filing chp 7 pro se (married but not filing jointly) with no assets in FL. My 341 meeting is schedule for 2/14/12 am. There's not much time before my 341 meeting and I am so stressed out I can't think straight. If they are trying to rattle and scare me, it worked! The letter says to contact their office by calling 800# but should I do that without an attorney? I can't afford one that is why I filed pro se and did not even have the money to use a petition preparer. I called the trustee's office last week because I did not receive any request for documentation for my 341 meeting (I read on this forum the trustee normally asks for doc one month prior to the 341 meeting). The lady who answered the phone (maybe the assistant) was very curt to me and said it is not their responsibility to ask for documentation. She said my attorney should have sent in my 2010 and 2011 taxes to the trustee. I told her that I did not have an attorney nor did I have a petition preparer. She seemed a little less sour towards me after that and said to send in my 2 previous year taxes. I'm almost done with my 2011 taxes , I owe over $1300 so far and my husband doesn't think I should file because we don't have the money to pay the IRS yet. But if I don't provide my taxes for both year, wouldn't the trustee just delay my case?

This forum with all the kind and supportive people is the only reason I was able to have the confidence to file pro se in the first place. Just want to thank you all so much in advance!

Your replies will be much appreciated!

[MSbklawyer]

This is why I HATE to see people try to file pro se, even in what appears to be a really simple case on the front end. Many of them go well; but as this case shows, many do not. It makes me grind my teeth to see these posts like: I filed my very own bankrupcy without an attorney and everything went off without a hitch. Golly, I saved a bundle on those attorney fees!!! It was easy!!!! Weeeeeeeee!!!!!!


Grrrrrrrrrrrrrr.

**sigh**

Based on the date of your § 341, my guess is that you're outside the 70-day window of presumed non-dischargeability. But my guess is that they are planning to object on the basis of fraud due to the amount of the cash advances and their proximity to your bk filing. It doesn't matter what you used the cash advances for or how desperately you needed the money. What matters is whether you intended to pay them back. That's a tough case for Discover to prove and they would have been very unlikely to threaten to file it if you had been represented by counsel.

The lady at the trustee's office was curt to you because most bankruptcy courts have a standing order regarding the information that is to be supplied to the trustee and when. If you're going to file pro se, you're expected to know that.

Get an attorney to talk to Discover's lawyer and straighten your bankruptcy out. Expect to pay the lawyer at least as much -- but probably more -- than you would have had your hired him to do your bankruptcy in the first place.

Bottom line, in all but the rarest of cases, if you can't afford to hire an attorney to file a bankruptcy, you probably don't really need a bankruptcy.

P.s. As for the taxes. File your return on time. Get an extension if necessary. If you can't pay the taxes with your return, ask for a payment arrangement. Adding a Late Filed Return problem to the Late Paid Taxes problem will only compound things.

[SweetGeorgia]

First of all, BREATHE. Don't panic.

When I was in the middle of my bankruptcy, I had such terrible insomnia and anxiety about the possibility of APs that I stayed up late at night and downloaded about a hundred credit card AP cases from PACER just to see what really happened in these cases. Now, this is MY district (Northern GA) and I think I searched on "Chase" instead of Discover, but what I found was:

-a few idiots who went and bought diamond rings a week before filing BK,
-many people who had paid taxes on their credit cards (i.e., converting a non-dischargeable debt to a dischargeable one), and
-several people with cash advances which had been used to pay taxes or child support (non-dischargeable debts).

And when those people lost, as they inevitably did, the arrangement reached was usually: pay off the debt at $50/month, 0% interest, until it's gone. Which is not nearly as bad as I would have thought, but makes sense. It does them no good to torpedo your ENTIRE case; they would rather you pay them SOMETHING while discharging everything else.

So, yes, see if you can get an attorney to help you with this. While that is cooking, the questions are (1) did you make any payments to Discover after July 2011? If you did, that's helpful, but not the end of the world if you didn't. And (2) what did you spend the money on and can you prove it? A rent receipt for $3550 would be great.

In summary - you triggered an internal flag at Discover by filing BK when you did. They don't know what you spent the cash advances on. They are probably looking for (1) fraud, which as MSbklawyer says, they wouldn't have done if you had a lawyer. It's hard for them to prove. It's not enough for them to say "you incurred the debt and thereby said you could/would pay." Or else they think (2) that you spent the money on something non-dischargeable. If you did, payment plan! Again, not the end of the world.

As for the 2011 taxes, the trustee really just wants to know if you have a refund coming. When she asks, say "no." If you have tax software, you can print out the return that you will be filing eventually.

Remember - YOU are important! Don't have a heart attack over this. (hugs)

[hkdaisy]

Thank you SweetGeorgia for the Zen words of encouragement! It has been incredibly stressful functioning on little sleep and no appetite.

I have bank records showing the cash deposit for rent payments, medical insurance payments, and utilities using the cash advances. Since I had no other source of income (unemployment ran out, drained my savings acct...) those large deposits are from my Discover Cash Advance. I did not use any of the money for non-dischargeable debts, converting a non-dischargeable debt to a dischargeable one, or buy any luxury items like diamonds as some of the examples you listed. I did not make any payment arrangements with Discover (or any of my other creditors).

Unfortunately I cannot afford an attorney. That is why I feel so trap! Should I write a letter to their attorney and provide an explanation of the cash advances like it said in his letter to me? I am not sure if that is a good idea as the letter also states "THIS LETTER IS AN ATTEMPT TO COLLECT A DEBT. ANY INFO OBTAINED AS A RESULT OF THIS LETTER MAY BE USED FOR THAT."

Does this attorney's letter violate the automatic stay when I filed for bk?

[malf1204]

I would not write him a letter anything you say to him can be used against you in the AP and you will probably incriminate yourself or he will coax you into it. Here in Maryland they have attorneys at the Courthouse that you can meet with and there are also attorneys who handle low income/or pro-bono case check with your local bar association or the courthouse.

[hkdaisy]

Malf, I think your advice makes sense. I don't want to incriminate myself. In the letter, he said "...our client is CONSIDERING filing an adversary proceeding..." Would it cost a lot of money for a NYC attorney lawyer to come to FL for my 341 meeting? I have no asset, no savings, a part time contracting job that pays less than my monthly expenses.

When I first considered filing, I spoke with the Legal Aid Society who gave me some names of lawyers who handle low income cases. The low income lawyers still wanted $800-$1300 to do a chp 7 no asset case. I did not qualify for pro-bono as I didn't have over $10,000 of medical fees as the majority of my debt. I will contact the FL bar referral service for "low fee panel" and let you all know if I'm able to get a lower fee attorney.

Thanks again for your responses.

[mountanddo]

I have bank records showing the cash deposit for rent payments, medical insurance payments, and utilities using the cash advances. Since I had no other source of income (unemployment ran out, drained my savings acct...) those large deposits are from my Discover Cash Advance. I did not use any of the money for non-dischargeable debts, converting a non-dischargeable debt to a dischargeable one, or buy any luxury items like diamonds as some of the examples you listed. I did not make any payment arrangements with Discover (or any of my other creditors).

[/B]

hkdaisy, I would heed the advice of MSbklawyer...

It doesn't matter what you used the cash advances for or how desperately you needed the money. What matters is whether you intended to pay them back. That's a tough case for Discover to prove and they would have been very unlikely to threaten to file it if you had been represented by counsel.

[shark66]

Would it cost a lot of money for a NYC attorney lawyer to come to FL for my 341 meeting?

Well, such an attorney would have to be licensed to practice law in FL as well to begin with. And yes, it would cost a lot of money if that were the case.

Lay low and see what happens. Worst case scenario, you'll have around $4K that won't be discharged and that you'll have to pay back one way or another.

Good luck to us all.

[despritfreya]

I am going to put a different spin on this. Mind you, my experience with such letters is as an attny therefore, the fact that I ignore them and "get away with it" may be a result of my clients being represented.

The letter your received is not unusual. The point of fact is, however, that sending the letter means nothing. If a creditor thinks it has a claim under 523(a)(2) then it needs to timely file the complaint. Why would my client offer to settle something that does not need to be settled? My position is this:

If you, Discover Card, think you can prove the elements necessary under 523(a)(2), then file your complaint. Once filed, maybe we will negotiate a settlement or maybe we will defend it - but I am not going to have my client sign a document "reaffirming" any debt at this time.

As a result, when such letters come in I simply ignore them. Don't even send them to my client. Sitting here typing this I cannot think of one instance where the creditor followed through in filing a complaint after sending such a letter. To me, it s a bluff. But, it may be a bluff due to my client having representation and the creditor knowing that it will have to deal with an attny on the other end.

If this were me, I would ignore the letter. If a complaint were to be timely filed I would then settle as arguing over the amount makes no sense.

Des.

[hkdaisy]

Wow despritfreya, I feel so empowered after reading your post! Thank you sooooooooooooooooooooo very much!

[Lalalink]

You spent the money on living expenses... you robbed Peter to pay Paul... you didn't rob Peter to pamper yourself... you did something any layperson would do to try and juggle life expenses in this horrific economy. Discover would be hard pressed to prove fraud. I totally agree in laying low and ignoring the letter (i.e., I absolutely would not contact Discover or the attorney). ((hugs)) I believe your 341 will go smoothly. If asked by the Trustee, you do need to make it clear that you were not planning on bankruptcy at the time you used your Discover card; however, I do not think it will even come up.

best wishes for a speedy 341,
Lala

[SweetGeorgia]

hkdaisy, I did some more reading and moseying around PACER (insomnia!). I just looked at some of the AP cases Discover and Chase had filed in Florida in the last year, and it's reason for you to be optimistic.

Florida attys didn't seem to file APs for debt charges over 90 days old unless the payment was to "U.S. Treasury" or "XYZ Jewelry Store." They're going for straightforward presumption of non-dischargeability (or actual dischargeability with the taxes). Georgia attys file APs on charges outside the "presumption period" much more frequently.

Almost every debtor had an attorney - which makes me wonder, because there must be more pro se debtors out there. Possibly the credit cards are more willing/likely to file the AP when there's a defense lawyer? That seems counter-intuitive, but it's obviously such an assembly-line process. The bank attorney cranks out the APs, and the debtor attorneys crank out the settlements. It's profitable because it's quick and easy. Filing APs on pro se defendants may not get the expected result (fast settlement) because pro se defendants do not know that's how the game is played.

The few pro se cases I saw were memorable. One had charged several thousand dollars on Christmas Eve, only about a month before filing. Turned out that to be bail for her husband, not Christmas presents! She won. Another had traveled to Jamaica shortly before filing. But it was her grandmother's funeral, not a vacation. She attached a copy of the funeral program, she explained every charge, and she won.

Apparently, very few lawyers fight back. I thought that was a little disappointing, actually. Certainly it isn't ideal to file BK when you've made credit card charges within the "presumption of non-dischargeability" period. But sometimes people have to do that to survive, and the presumption CAN be overcome.

Your case is even stronger, and I'm hopeful for you! You can do it on your own if you must. I don't think Discover is likely to file an AP, but if they do you'll have time to answer - either on your own or with a lawyer. Don't hire a lawyer who just wants to make a settlement for you. Chin up!

P.S. Be aware that Discover could wait until the last minute (60th day after your 341) if they want. Jerks.

[hkdaisy]

You are not only SWEET Ga but funny too! The insomnia I can relate to for sure...I needed a smile today, so THANK YOU for that post.

As for the 2011 taxes, the trustee really just wants to know if you have a refund coming. When she asks, say "no." If you have tax software, you can print out the return that you will be filing eventually.

I took your above advice and sent in my 2010 and 2011 taxes to the trustee (I owe $ to the IRS for my 2011 taxes so I have not filed yet).

Lalalink, thank you for your comment. I think at this time I will lay low like Des suggested. I have been holding out on $850 worth of dental work and living with the pain for months so hiring an attorney is out of the question. I will be fighting this on my own with the help of the good people in this forum. Sincere appreciation is conveyed to all of you

[despritfreya]

I did some more reading. . .I just looked at some of the AP cases Discover and Chase had filed in Florida. . . Almost every debtor had an attorney. . . which makes me wonder, because there must be more pro se debtors out there. Possibly the credit cards are more willing/likely to file the AP when there's a defense lawyer?. . . The bank attorney cranks out the APs, and the debtor attorneys crank out the settlements. . . Filing APs on pro se defendants may not get the expected result (fast settlement) because pro se defendants do not know that's how the game is played. . . Apparently, very few lawyers fight back. I thought that was a little disappointing. . .

A couple of comments. . .

1. Your observation that there are more APs filed when debtors are represented is a good one, but there are at least two problems.

A) The debtor’s attny is not required to handle the AP as that would most likely be outside of the fee agreement. As a result, the creditor would not necessarily know that the debtor would have representation when the AP is filed. Even in pro se cases there is no way for the creditor to know that the debtor will not seek the assistance of an attny. The creditor would only know if the debtor is proceeding pro se or with an attny when the Answer is filed.

B) There is no way to tell how many pro se debtors fall prey to letters such that OP got thus the AP does not need to be filed.

2. Your disappointment is not warranted. Defending an AP with representation can cost between $15k and $30k and, if the debtor loses, the debtor may also have to pay the creditor’s legal fees (another $15k to $30k). No attny would suggest that their client run up $20k in legal fees if the amount in controversy is less than that. You settle. That is why the vast majority of the cases you see end in settlement.

Now mind you, you are correct. A fast settlement is what a creditor hopes for as going to trial is risky (your pro se examples are evidence of this). Settlement is more likely to happen if, when the Answer is filed, it is filed by an attny.

Des.

[hkdaisy]

Des, very interesting comments. To make sure I understand, if Discover's attorney doesn't show up at my 341 meeting on 2/14 (my best case scenario) they would still have 60 days AFTER my 341 to file an AP? as stated by SweetGa...

P.S. Be aware that Discover could wait until the last minute (60th day after your 341) if they want. Jerks.

How will I be notify?