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Credit card too high to file chapter 7

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  • Credit card too high to file chapter 7

    Hi
    My husband and I have just consulted out attorney. We live in NJ and are considering chapter 7. We pass the means test and have negative disposable income. We have 70k on credit cards, one of which has the majority of the debt. Our Bank of America card has a 50k balance. We've had the card for 20 years and the debt has accumulated over time. My attorney stated that he has been in this business for 35 years and has never seen a si her credit card with that high of a balance. Because if this it says it would be easier to file chapter 13. His reason for this is that Bank of America might object and if they do we would have a hard time explaining how we were ever going to be able to pay back that debt. And then if they do object, we can switch to a 13 but we wouldn't be able to get the payments as low as if we started out at a 13. We never applied for a credit line increase, we got the card in college and they just kept increasing the credit line over the years. Anyone ever experience anything like this?

  • #2
    I will be interested in hearing others' opinions on this, but my gut says talk to other attorneys. No, I have not seen anything like this in my (short-ish) time here. Wouldn't BoA still have to prove fraud? If you haven't done anything crazy with it in the past couple of years -- just your usual spending habits -- I think this would be hard for them to win.

    In all of my paperwork and consultations with attorneys, I have never seen a "cap" or limit for one card. If this guy just isn't comfortable or is trying to push you into a 13 (more profitable for them), it's time to look elsewhere.

    Comment


    • #3
      How much of the $50k did you run up in the last one year? Of that amount, how much did you run up in the last 6 months? During all this time were you making at least the minimum monthly payment?

      The reality is that your creditor can file the exact same 523(a)(2) complaint in EITHER Chapter so, without knowing more I do not see an advantage to filing a Chapter 13.

      Edt to add: You said you kept increasing the credit limit. When was the last time you sought such an increase and did you, at that time, fill out or verbally discuss your income?

      Des
      Last edited by despritfreya; 05-19-2017, 06:51 AM.

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      • #4
        Actually, she said that they NEVER requested a credit line increase. BoA just kept raising it.

        Reminds me me of my experience with Citibank. I requested for it to be lowered, they refused, and a couple of months later, *raised* it to $17,900. It's like they are just asking for it sometimes! Geez. I called & closed the account after that, so it just wasn't available to us any longer. Someone has to have some damn common sense.

        Comment


        • #5
          I have never requested the credit line to be increased. We have never missed a payment, but my husband has now lost his overtime and we are struggling. My attorney advised me to stop paying. So this month is the first payment I've missed. We have used the card twice in the last 6 months both were cash advances for around 400 each. I took the cash to pay other bills. Trying to stay afloat. Looking over the statments the balance has been between 48-50k since 2014.

          Comment


          • #6
            Angel, I'm not an attorney (^despritfreya is) but I don't see a problem here. Start making some other calls. They can answer this one question over the phone, most likely. Just give them the details you've given us here.

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            • #7
              Based upon what you have just written why not try the 7? The creditor has 60 days from the date of your 341 meeting to either 1) request an extension of that date or, 2) actually file the Complaint. If a complaint is filed, you either defend since proving actual fraud is difficult or 2) attempt to negotiate a settlement for something less than what is owed.

              If you go the 7 route and the creditor sends a threatening letter stating that it believes it can file and win a non dischargeability Complaint, my recommendation is to ignore the letter. Many times such a letter is just a threat and the threat is never followed through. If the creditor is serious then it will timely file a Complaint. Do not offer a settlement when a settlement is simply not necessary until the creditor does what the law states it should do.

              If the Complaint is filed and you want to force a 5 year repayment plan then you could start in the 7 and convert. The disadvantage to this if a Complaint is filed is that converting to a 13 is not going to eliminate the adversary proceeding. You will still have to defend or settle.

              If you start out in a 13 the creditor has the same opportunity to file a Complaint. The likelihood of filing a Complaint is less depending upon the proposed payback to unsecured creditors. As we sit here today, I just don't see the need to go this route based upon what you have stated.

              I recommend that you meet with several other bk attnys in your area and explore how each would approach your situation.

              Des.

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              • #8
                Thank you. I will start calling around.

                Comment


                • #9
                  Given that you have had this credit card for a long time, and accumulated the debt over a period of years, it is highly unlikely that the creditor would file an objection unless you have run up a significant balance within the past few months. It doesn't even matter if you exaggerated your income on the original application. That was 20 years ago, and obviously, you have been paying on this debt for years. I just don't see how the creditor could possibly prove fraud at this point, and that is what they would have to do in order to have the debt ruled non-dischargeable.

                  Comment


                  • #10
                    In my Ch 13, I had just over 50K on several credit cards with one major bank (not BOA) and they never filed a proof of claim on any of the accounts. Also BOA filed a POC on only one credit account (I had over 10K over several credit cards and lines of credit.

                    Comment

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