Can using paypal to send yourself money hurt your chances at a Ch 7 bk discharge?

[IlluminateSh]

In this threads, there are talks about how you can use paypal to make purchases to yourself in order to obtain cash from your credit cards to avoid high cash advance apr %:
(bkforum.com/forums/index.php?showtopic=275976)

From reading this and similar threads, these type of transacitons don't appear to be fraud or criminal, although you risk having your accounts closed.

What if you accumulated a balance of over $30,000 on your credit cards (for legitimate expenses, not luxury items) from using this method and then defaulted?

Could this hurt chances of a CH 7 BK discharge?
Any other legal ramifications especially after defaulting on those accounts and not being able to pay back?

[IlluminateSh]

Reasons for a Ch 7 denial discharge:
(I can't seem to see where these types of paypal transactions fit in)

a) bankruptcy.lawyers.com/Bankruptcy-Basics/Denial-of-Discharge-in-Chapter-7-Bankruptcy.html
b) law.cornell.edu/uscode/html/uscode11/usc_sec_11_00000727----000-.html

[IlluminateSh]

In this threads, there are talks about how you can use paypal to make purchases to yourself in order to obtain cash from your credit cards to avoid high cash advance apr %:
(bkforum.com/forums/index.php?showtopic=275976)

Sorry the link doesn't work bcuz this forum isn't allowing me to post it.

[tcreegan]

Hi IlluminateSh,

If I were in your shoes, I would want a legal opinion from a good BK attorney on the legality of what you are doing. With 30K at stake, I don't think internet forums are going to be enough. Two ways to go on this...

What will the credit card company do? They might be clueless, write the debt off, never look into it. Or would they investigate and file an Adversarial Proceeding?

What will the trustee do? It is going to have to pass the 'smell test' ..if the trustee thinks something shady is going on they are going to want a full explanation.

Another problem: something technically legal outside BK court might not be OK inside BK court. For example, § 727(a)(2)(A) doesn't say you committed fraud, it says did you intend to commit fraud. § 707(b)(3)(A) is the reason you want to make sure it will get past the trustee, they can dismiss your case if they think you filed "in bad faith"

When walking a fine line, it would be a good idea to have a good attorney holding the net....

Tom in Colo

[DebtHater]

Let's see, your talking about intentionally running up your credit account and defaulting. Then filing bankruptcy. Not only is it unethical, it sounds very illegal.

Bankruptcy is intended to give people who are in legitimate financial trouble a fresh start. Why play games with the system? The bankruptcy reform of 2005 (technically called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005) was put in place because of people playing games. Why make it worse for those in the future?

[shark66]

Another thing to bear in mind...

Beginning January 1st, PayPal will be reporting to IRS any account with more than 200 transfers (you may want to log in and check whether I've posted all the correct numbers...not certain at the moment) as well as any account that has received $20,000 or more over the course of the year...

From the policy updates, 09/22/2010:

Taxes. The following acknowledgement has been added to Section 4.7 (Taxes): You acknowledge that in starting in 2011, PayPal will report to the Internal Revenue Service the total amount of the payments you receive each calendar year into all the Accounts you own if you(i) receive more than $20,000, and (ii) receive more than 200 payments, in that calendar year.


Good luck.

[IBroke]

Let's see, your talking about intentionally running up your credit account and defaulting. Then filing bankruptcy. Not only is it unethical, it sounds very illegal.

It amazes me that some people have the ability to read things into a post that - well - aren't there.

NOWHERE is mentioned over what period of time this debt was accumulated and NOWHERE does the OP say that he did this when he was already having in mind to file BK.

As long as he didn't violate any timelines and other regulations that would apply to CC-usage when filing for CH7 BK, I don't see a problem. That money shouldn't be taxable either because it's credit and not income.

[luckstyl]

I don't understand why the OP would even go the paypal route. If you are planning on filing BK, why are you worried about the cash advance interest rate? Why not just use the CC's themselves on your expenses?

[IBroke]

I don't understand why the OP would even go the paypal route. If you are planning on filing BK, why are you worried about the cash advance interest rate? Why not just use the CC's themselves on your expenses?

The OP didn't clearly say if he is planning to do the paypal-move or if he already did.

Based on my own experience, lack of money can turn you into a little "inventor". The "paypal-trick" offers additional options to survive if you are really broke: You can use your credit with the CC to pay your mortgage - for example. Or make a car-payment. Of course, those aren't solutions but many will recall what we did to avoid what was coming sooner or later.