Filing Ch7 when you are not late on bills

[SumBeach]

I am going to file Ch 7 in mid-July. I am having to wait a 90 day period due to some credit card transactions. My attorney advised me to stop making monthly payments on the credit cards and any other unsecured debt. The question is, last month when I retained an the attorney, I had not defaulted on any bills. I have not been behind or late on a bill in more than 6 years. However, I never was able to pay much more than minimums on the three credit cards (which is unsecured debt totalling about $28,000). I have now missed the first payments on the three cards and the creditors are starting to call.

Prior to talking to and retaining the attorney, I had called the credit card companies and asked for a lower interest rate. The rate on one of the cards had gone from a reasonable 7.99% to more than 25.49% as of the last statement! It was increasing every month due to the balance and available credit, and the fact that I was only making a little over the minimums. I was told by one credit card company (the one I owe the most to) that "there is nothing we can do". They also advised that starting next month, the minimum would jump (according to a new law) to a flat rate of 3% of the balance, which is now more than I will be able to afford just to make the minimums. I have not called them since and tried to negotiate anything. Of course, they are now starting to call with "reminders" that I have not made this months payments. My attorney has told me to refer all creditor calls to his office and he would handle them. Should I be having any conversations with the creditors other than telling them to call my attorney? Should I even let them know that I am filing Ch7? I am afraid it is going to look bad that I was never late on the bills, then now all of a sudden I am behind and not communicating with the card companies, other than to have them call my attorney. I tried calling before to negotiate a better rate to hopefully avoid having to file and was denied...but I am NOT going to beg these people! Any thoughts? Thanks for your time!!!

[InDebtInMD]

I did the same thing.

My wife and I had been able to somehow make the minimums on our credit cards through using convenience chacks from other cards, tax returns, and finally our savings. Once all that was gone it was only a matter of time.

Finally missed on MBNA in March/April, and when they called I inquired about whether they could do anything or had any programs to help with my debt situation. They declined, and we went to CCCS for some credit counseling.

The CCCS guy was very nice, went through our income, expenses and (many) credit card bills, and demonstrated to us ethat we really had no choice but to file for BK. We filed Chapter 7 in early May and the 341 is scheduled for mid-June.

We do have a few charges within the past 90 days, but nothing large (probably around $500 or so total) - most of these were made by my wife who was at the time blissfully unaware of our situation. If these charges do not get discharged, so be it - I will pay them.

[3131tj]

glad for this thread!

Sounds much like me. The scariest part is when I just stop making payments. Mid-June my student loans kick in and new income tax payments. I can afford either them OR my cards - it's obvious what I will have to do. I was unemployed for nearly a year back in 1992 and almost had to file but somehow managed to get myself back on track and I just hate the idea of getting a bill and not paying it. I too have cards with MBNA who have increased my rates for the same reasons and I know they will NOT be helpful when the time comes. When one card went from 11.9 to 19.95 and I inquired they said "nothing we can do." Fine, nothing i can do either, I guess.

I meet with a BK Att'y tomorrow. It has taken me months to get this far but if I am going to do it...well, I guess I need to get my butt in gear!

I'll be interested how things go for both of you - keep me (us) posted and good luck!

[SumBeach]

Years ago I paid money for a person at CCCS to help me get on track...to control my spending and see if there was a better way to handle bills. I was not really in debt that much back then, but I was afraid it would only get worse if I didn't learn how to manage my money. I quickly found out that the CCCS folks did nothing more than I was already doing.....a budget! I track and manage my budget via Excel on my computer. I balance my tracking program with my bank statement each month down to the penny. I know exactly how much money I have at all times, and I budget NO money for entertainment or unplanned expenses, such as car repairs, mainly because there is no money left over for such things....(by the way, charging car repairs was one of the main reasons I got so far in debt to start with) I learned from CCCS that a good budget plan and constant monitoring was the main tool for getting expenses under control. This will give you a clear picture of where you stand, you'll know where you can spend and where you have to cut back. It is actually very easy to use once you set it up and get used to living on a budget. But with a tight budget, you also see the ugly reality that there is not enough money to get out of debt in a timely manner and not enough money to double up on payments.

I am single living in Southern California. I have not assets to speak of and I live in a small apartment that cost $900 a month. On my $60,000 a year salary, I am basically working poor out here! I have a cable bill, cell phone bill, home phone/computer online provider bill, electricity/ gas/water/trash bills, car payment (only $262), and auto insurance. I budget only $60 to $80 per week for groceries, and $200 per month for auto gas...that's about 5 fill-ups per month. The one expense that I have that I could get rid of, if push came to shove, is $27 a month dues for the sailing club I belong to. That is the one "entertainment" bill that I have and I budget that into my spending each month. There really is no where else that I can cut expenses, and on a 60 grand salary, I am able to save a meager $25 per month in a savings account and contribute nothing to my 401K!!! It begs the question, what do the poor people do out here???

Now that the BK rules are about to change, and the credit card companies are raising their minimums due each month, there really is no way out for many people. People like myself, who are middle class, hard working Americans.

[cloudship]

I think a lot of us got pushed to that final step of going the bankruptcy route because the banks, instead of actually doing something to help people keep current with their payments, instead hike up interest rates, fees, and minimum payments. Like this is going to help people who already can't afford the old payments? I found that it was basically a attempt by the credit card companies to get people into payment plans, but even on those they wanted a large payment up front. I just don't get it.

If you have put your attourney on retainer, and actually are planning on the bankruptcy route, then by all means give them that information. What is going to get reported is that you missed payments, did not make minimum payments, or that they are charging off the account. The fdact that you did or did not work with them in no way reflects on your credit report. Your attourny is there to help you in this stuff, that is why you are paying them and why you have to put money up front.

[HRx]

I think a lot of us got pushed to that final step of going the bankruptcy route because the banks, instead of actually doing something to help people keep current with their payments, instead hike up interest rates, fees, and minimum payments.

You understand why creditors do this right?

[SumBeach]

Well, I think credit is just too easy to get these days. Our economy operates on credit. Most commercials push credit. And it's very easy to fall prey to credit. In my case, the debt sort of slipped up on me. I was using it to pay for auto repairs, auto insurance, a few emergency plane tickets, groceries, and other unplanned expenses...all with the intention of paying it off immediately or within a few months. All was fine for a while, then suddenly the interest rates started increasing, the balances started increases (even after I stopped using the cards) and suddenly it was more than I could pay....and of course, there was always something else that came up that caused me to not pay those balances off as planned. So, I understand it is not the creditors jobs to help us out, but 29.99% interested (as of my latest statement that arrived today), and late fees of $39, makes it so that you cannot even help yourself out. I think the best idea is to live without credit cards....that's my plan after this BK is complete. Unless you have plenty of money (cash flow), credit cards do not improve or add to the quality of your life. I think it will be much easier to learn to live without credit cards than to live the with stress of trying to manage credit cards in a responsible manner on a conservative income.

So, Todd, just why do creditors do this? ;)

[cloudship]

Their answer, My answer, or what I REALLY think the reason is?

According to them it's a disuasive tactic, and that it helps them get the most money they can. In actuality, it is a ploy to get people into agreements which are more binding upon them, which tie you into doing business with them instead of another "counseling" (read, consolidation loan) company, and to get as much money up front before you file bankruptcy, which at this point in relity they know you are oging to have to do anyway.

Personally, however, I believe that the real problem comes down to the fact that these companies KNOW that they took too much advantage of people and are now facing a huge risk of not having qualified borrowers in several years time. Bakruptcies and such are an easier way for them to write off these losses and yet appear to be the victims. If the government forces them to write something off, they can say it's the fault of the laws instead of having to explain it to their stock holders.

OK, time for me to get off the soap box.