Hello again all. I have done much reading on this board and others and I must say I am glad I found these boards. I am getting close to making a decision on my financial situation. I just thought I would pose a general question to all of you. I know this is an extremely important decision with many ramifications and I just wanted your views. Ok.....I am currently in CC debt that is twice my annual income. This and a $5,000.00 car loan are my only debts. I have recently paid $8,000 on one card leaving about a balance of $1500.00.(I wish I read these boards before doing this because now if I file BK it's like I threw that money away.....is there a way out of this?). The other CC debt is spread out over 5 other cards. All creditors have just jacked up my Intrerest rates due to "carrying high balances in reference to income" and I cannot obtain a lower rate or balnce transfer....I can't get a consolidation loan due to income. So here goes......should I...... File CH7 BK and just "start fresh"....I was thinking since I paid the 8K to the one CC I could pay off my car using the CC and just file and clear all debt....is this smart? Should I pay off the one CC entirely and sock it away so that I "may" use it after discharge and just keep my car loan? I, like so many others woke up one day and said "How did this debt snowball?" and further, "why did they give me so much credit in the first place?"...rest assured this situation will not re-occur......I look forward to your responses.
Here's my .02 Since you paid 8k on one credit card, your options are probably limited for a certain period of time. This is because payments over x amount to one creditor would be considered preferential payments. The same would be true in reverse. If you pay off the car with a CC, you won't be able to file for a period of time because of the large cash advance. I have heard many people say, that even though they had a -0- balance on a CC, and did not include it in BK, once the CC got wind of the BK, they closed the account. I think somebody posted something just in the past few days about Sears doing that. BK is a purely personal decision. I can't help you there
Soooooo..it looks like it was a dumb move paying off that card.....can you explain further on "preferrential payment"? Can I get this back? How is this defined? Thanks.
Let me speak from recent experience. I filed for CH 7 in June 2002...owing almost 40k to credit card debt and a car lease. I was in a similar situation as you. After many sleepless nights, I made the decision to call a lawyer and file. This was one of the hardest decisions I ever had to make...actually telling my family was alot harder! Sorry to say that if you decide to file, that $8000 you just paid to the CC is lost. Also, since you did pay that large sum of $$ to one creditor...you will have to wait somewhere between 3-6 months before you can file due to preferrential payment (as mentioned in a previous post). Preferrential payment is a large sum of $$ paid to one creditor over paying the others. If you decide to file now, your other creditors can file suit for part of that money. If you are thinking of filing, do not make any more payments of that kind. Continue to make your payments on your car loan if you plan on keeping the car...even through your BK process, you must continue to make these payments on time or else they will repo the car. Now I dont know if you have stopped making payments to your creditors yet...I was current with every payment up until the day I filed. I never received one call from a creditor and not one of my accounts ever went to collection. If you have stopped making payment, expect to start receiving calls from your creditors. It is true that if you have a credit card with no balance at the time of filing...that creditor may choose to close the account just because you filed. I only had one credit card (Neiman Marcus) that I did not file on and that card is still open. Re-establishing credit after BK was not hard for me..my discharge was 9/2002 and I received a Capital One secured card the following month...sent them $99, received a $500 CL. 5 months post BK...I also have Orchard unsecured with a $1000 CL, a Providian Platinum unsecured with a $2000 CL, and I just received a Target card with a $200 CL. If you have any questions at all, I would be happy to share more of my experience with you. I know how hard of a decision this can be and I relied on message boards to help me with the decision and with every step along the way.
Payments of over $600 either 60 or 90 days {forget which one} prior to bk is considered preferential treatment. The trustee would then demand the creditor who received the money return it to the bk court to be distributed among the other creditors. You would never seeor touch it. Also, large cash advances or cc purchases are looked at carefully. The trustee has a lot of discretion in these matters. Many will ask if you've had a cash advance in the 12 months prior to filing. Dosen't mean they'll deny your petition but they can sure investigate all they want. Your best bet is to see a lawyer. Most will give a free initial consultation. Also, all states have different amounts of things you can exempt in bk proceeding like equity in a home or car or personal property. Don't pay off that car until you know the rules for your state.
Here's a novel trick (hypothetical, of course). Get a whopping cash advance (or several small ones) on this card that you've paid down. Sit on the cash (literally--do not put in a bank acount). Should you pay off your car immediately, you would only have to sell it if its value exceeded the allowable bk exemption. Once your bk is final, pay off the car with the 5k you stashed away. Should there be any questions about the large cash advance--you could assert that it was used to make payments on the other cards/living expenses/yada yada yada.
Thanks for all the advice.....I'm not sure, but I remember reading somewhere that I could request the "preferrential payment" made to the CC returned to me(that I made it in error or something)....anyone have experience with that? At the time I figured it was a good idea, but now looking at the big picture(and reading these boards) I realize it wasn't.......I had no idea at the time HOW MUCH debt I was in.........stay tuned......I guess.
Re: Re: Need to make a decision Ask an attorney would be the smartest thing to do. Usually the first BK consultation is free.
Re: Re: Need to make a decision Check witha BK attorney first about the cc you paid the 8k to. Be prepared to switch attorneys because if he tells you go ahead and get a cach advance and hide the money he might then tell you he can't represent you. Just depends on how ethical he is. When I filed years ago my lawyer told me to run up as much debt as I could first and wait a while. He didn't care much about ethics and hated banks. Instead of making a 8k advance try smaller ones spread out. Another trick is use the card to buy prepaid certificates like gas cards, grocery store gift cards etc. These are items you'll need to buy in the future and you can show you needed food, gas, etc to survive. If it were me I'd get the 8k back in cash or services.
