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Advice Appreciated - I need to sleep tonight!

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  • Advice Appreciated - I need to sleep tonight!

    Hi there, new here

    We are seriously considering filing Chapter 7. My husband and I have about $35,000 in credit card debt and $150,000+ in student loans. We rent and have two older vehicles paid in full, worth about $10,000 together. I understand that nothing can be done about the student loans, but the payments on them is what caused us to begin our descent into credit card debt. We have also made poor financial choices and take full responsibility for our situation. We have come to the realization that we will likely never get out of our credit card debt as each month we are charging for living expenses. Our gross annual income is right around $70,000, so as I understand it this should easily qualify us for a Chapter 7.

    As of today, we have never missed a payment or paid a bill late. However, we are rapidly running out of options and can’t see making it much longer doing what we are doing. We would like to file as soon as possible, but have some questions. We are planning on meeting with an attorney next week for an initial consultation, but in the mean time, my mind is running a million miles a second. Hopefully you all can help me out

    Question 1: From my research, I understand that you should not use your credit cards in the 90 days prior to filing. How hard and fast of a rule is this? We have used our cards for mostly small purchases, gas, household expenses, food etc. just in the last week and we will have a rental car charge tomorrow ($191). How do these charges affect filing? FWIW, the option of bankruptcy just came up and have not been committing fraud.

    Question 2: Last Christmas, I bought our family a cruise as a gift and college graduation gift for my husband and paid for most of it using extra money I’d earned at second job. The cruise is in November of this year and we still owe $280 before August 18. We have the cash available to make this final payment. Unfortunately the ticket is non-refundable so not going is really not an option. Yes, I realize this was a poor choice...please don’t judge me.

    Question 3: As I said, we have not missed a payment. Advice I’ve read here is just to stop paying on the credit cards you will file on. This is going to be hard for me. I am a teacher and I cannot have creditors calling me at work. Any advice on how to deal with calling creditors?

    Ideally, I would love to file by the end of the month. If I’m correct, this would put our 531 meeting about 30 days out around the end of September. Is our pre-planned travel going to interfere terribly with the timing of this?

    Waiting would be okay, expect for the creditors calling. We’d likely have to wait until December – February, and then we run into the tax return problem. We would likely receive a refund of approximately $4-5,000, which we would likely use to pay for my daughter's cheerleading program for the year and likely a down payment on braces for myself.

    Any advice you can give would be appreciated, as I literally cannot sleep at night worrying about all of this. Thank you!

  • #2
    um! I hope that you are asleep by now and that I can put you at ease after you have had a good night's sleep.

    Question 1: The 90 days you refer to is from 11 U.S.C § 523(a)(2) which provides that if within 90 days of filing BK you incur debt of more than $500 to a single creditor for LUXURY goods and services, that debt is presumed to not be dischargeable. If you go to the above link, you will see that
    (II) the term “luxury goods or services” does not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor;
    A creditor must petition for a ruling that the debt is not dischargeable. Some attorneys will tell you to put 90 days behind all of your credit card charges. But, in many cases, that is pretty conservative advice. So, if an attorney tells you to wait 90 days, ask more questions. There is also a 70 day rule that says that if you take cash advances for over $750 from a single creditor within 70 days of filing, the debt is not dischargeable.

    Question 2: As far as I know, there is nothing in the bankruptcy code that prevents you from spending cash on anything before you file BK, as long as you aren't transferring cash to others to hide it from your creditors or the BK trustee.

    Question 3: If you know you will file BK, you should stop paying dischargeable debt. If you file BK soon, you don't need to worry much about creditor's calling. If you do get a call at work, tell the creditor you are not allowed to get personal calls at work and offer to confirm that they have another number where they can reach you. By law, that should stop them from calling you at work. It worked for me. For more about dealing with calls from creditors, see the collections sub-forum.

    How soon your 341 meeting will be scheduled depends on how busy your local court is. Tell your attorney about your travel plans. S/he can time the filing of your petition accordingly.

    The trustee could claim the non-exempt portion of your refund attributable to tax withheld up to the day you file, even if you file today. The date you file your return or receive your refund is irrelevant. Trustee's have been known to keep cases open until a debtor receives a tax refund (that doesn't delay discharge). The later in the year you file, the more likely that is to happen. The trustee may also not care. An attorney with experience with the local trustees can tell you what the trustees' practices are. You may need to find another way to pay for the cheerleading and/or you may have to put off getting braces.

    Have you thought beyond your discharge? Have you figured out how you are going to pay the student loans and your living expenses without incurring more debt? Getting a chap 7 discharge will take a lot of pressure off of you and give you a great chance to start living within your means. Make sure you and your family get serious about making sure you don't wind up right back where you are in five years from now. Start with some very clear boundaries about how much you can afford to spend on that cruise. Future vacations should only be taken after you have saved the cash to pay for them.

    Now, if you didn't get any sleep, go get some rest and try to stop worrying. You will get through this and you and your family will come out stronger as long as you head the lessons from the mistakes you made in the past.
    LadyInTheRed is in the black!
    Filed Chap 13 April 2010. Discharged May 2015.
    $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

    Comment


    • #3
      Question 1: Although many attorneys would advise that you stop using all credit cards at least 3 months prior to filing, charges for routine household expenses such as food, fuel, and medicine are not a problem. Creditors have no legal basis to object to such purchases, and generally don't bother trying unless they see purchases of jewelry, costly electronics, travel, etc. within the lookback period.

      Question 2: Yes, this was a poor choice. Costly vacations are one of the worst "investments" you can make. At least you (presumably) paid for the cruise with credit cards, so when you ultimately do file for Chapter 7, the creditor will be the one paying for the trip!

      Question 3: Once you have decided for sure that you are going to file for Chapter 7, it is extremely important that you quit paying ALL unsecured debts, regardless of any collection calls or nastygrams which the creditors might send your way. This is necessary for two reasons. First, you need to be sure that you can live on your income alone, without resorting to credit cards, payday loans, etc. Second, any money paid toward debts which would be discharged anyways is a waste. Do not worry about creditors calling at work. By law, they must stop if asked. Since you do not own any real estate, or anything else of value for that matter, you could just send the creditors/collection agencies a cease-and-desist letter, because they probably won't bother to file a lawsuit if you do.

      In any case, you need to deal with your student loans. If you cannot make the payments on your student loans, and still afford REASONABLE living expenses (i.e. reasonable rent, food, health care, vehicle expenses, etc.) then you may need to pursue a hardship discharge, or if that isn't granted then file for Chapter 13 after you file for Chapter 7. This is a common tactic for dealing with large non-dischargeable debts. First, file for Chapter 7 and discharge everything that is dischargeable, then file for Chapter 13, and let the court set your payment based on reasonable living expenses, which the student loan creditors would be forced to accept, and they would be blocked from taking any collection actions against you as long as the plan payments are made.

      Comment


      • #4
        I can't add much that Lady in Red and bcohen hasn't said, but I will tell you this. I had a really hard time when I had to not make that first payment on a credit card, but I did it and it has allowed me to be able to pay my attorney and actually not have to "rob peter to pay paul". You will be able to do it, in a way it is very freeing because you take control back from all the credit card companies. I had never been late one day on any of my accounts until June when I stopped paying. As for the collection calls, because I won't actually file until October (for numerous reasons) I have a Samsung Galaxy s5 phone and I just reject the calls when they first come in and from there on out all the rejected calls don't ring through. They can still leave a message so they know they have reached who they want to reach. Before I stopped paying I went on all of the websites for all of my credit cards and changed the phone numbers to just my cell number. And previously before that to save money I got rid of my home phone (best decision I ever made). Also there are alot of people on here who have used Google Voice (search it on this forum) to avoid the hassel of phone calls. But definitely go on and delete your work numbers, I don't know if this actually worked but I have not received any phone calls at work yet and on an average my phone is logging about 10-15 phones calls a day.. Good luck and take a deep breath it will all be ok

        Comment


        • #5
          Thank you for the replies. This realization has been very difficult for me because I've always been a "rule follower" and it just seems so wrong to stop paying my bills. I am incredibly grateful to have a second chance to get things right and hopefully save more for retirement and the kids' education. My student loan payments will be manageable without the other debt payments. I have a federal loan for about $80,000 but I am on the IBR with the public service loan forgiveness program and the payment is only $71 and the balance will be forgiven in about 5 years. The problem is the private loans, which have a balance of about $48,000 and a monthly payment of $410. My husband just finished school about a month ago so we are in the grace period before payback on his loans, but I'm assuming we'll be able to get on an IBR plan for him too so the payment will be minimal. When we started repayment on my loans, we were making about $25,000 less a year than we are now, which is why the credit card problems began in the first place.

          I'm grateful for the reassurances that the travel we have coming up won't pose a problem. Do trustees ever make snarky comments about these types of things? Obviously it wouldn't be looked at favorably, but as long as it won't cause my case harm, I guess I can live with that.

          Comment


          • #6
            I believe the below will address some points not previously hit upon. . .

            The cruise is in November of this year and we still owe $280 before August 18. We have the cash available to make this final payment. Unfortunately the ticket is non-refundable. . .
            If you file before you have taken the vacation, the tickets/reservations are an asset of the bk estate and need to be listed on Schedule B. The moment you file, the tickets/reservations will not belong to you and, unless the Trustee says “ok”, you will not be able to utilize them. Discuss this with the attny.

            Waiting would be okay. . . We’d likely have to wait until December – February, and then we run into the tax return problem. We would likely receive a refund of approximately $4-5,000, which we would likely use to pay for my daughter's cheerleading program for the year and likely a down payment on braces for myself.
            If you have not received, cashed and spent the 2014 refund before filing OR, cannot find an exemption that covers it, the refund goes to the Chapter 7 Trustee. If you receive the refund before filing and use it as a down payment (“deposit”) for the braces, you may have a problem since the dentist will be holding $$ he is not entitled to keep as he has not performed the work. Again, discuss this with the attny.

            As to the student loans, if any of them are Federal, please review the below web site:

            https://studentaid.ed.gov/repay-loan.../income-driven

            Please note that the “income contingent” program, IMO, is not as good as the “income based” program.

            Des.

            Comment


            • #7
              Can the cruise tickets be listed as property that may be exempted? We are only at about $5,000 in personal property and I believe the exemption limit is $12,000 in Wisconsin.

              Comment


              • #8
                Originally posted by MeowGato View Post
                Can the cruise tickets be listed as property that may be exempted? We are only at about $5,000 in personal property and I believe the exemption limit is $12,000 in Wisconsin.
                I do not know as I do not practice in your state. This is a good question to ask your attny.

                Des.

                Comment


                • #9
                  I wish you well!
                  Last edited by 13ZULU; 08-19-2014, 10:37 PM.

                  Comment


                  • #10
                    Originally posted by MeowGato View Post
                    Hi there, new here

                    We are seriously considering filing Chapter 7. My husband and I have about $35,000 in credit card debt and $150,000+ in student loans. We rent and have two older vehicles paid in full, worth about $10,000 together. I understand that nothing can be done about the student loans, but the payments on them is what caused us to begin our descent into credit card debt. We have also made poor financial choices and take full responsibility for our situation. We have come to the realization that we will likely never get out of our credit card debt as each month we are charging for living expenses. Our gross annual income is right around $70,000, so as I understand it this should easily qualify us for a Chapter 7.

                    As of today, we have never missed a payment or paid a bill late. However, we are rapidly running out of options and can’t see making it much longer doing what we are doing. We would like to file as soon as possible, but have some questions. We are planning on meeting with an attorney next week for an initial consultation, but in the mean time, my mind is running a million miles a second. Hopefully you all can help me out

                    Question 1: From my research, I understand that you should not use your credit cards in the 90 days prior to filing. How hard and fast of a rule is this? We have used our cards for mostly small purchases, gas, household expenses, food etc. just in the last week and we will have a rental car charge tomorrow ($191). How do these charges affect filing? FWIW, the option of bankruptcy just came up and have not been committing fraud.

                    Question 2: Last Christmas, I bought our family a cruise as a gift and college graduation gift for my husband and paid for most of it using extra money I’d earned at second job. The cruise is in November of this year and we still owe $280 before August 18. We have the cash available to make this final payment. Unfortunately the ticket is non-refundable so not going is really not an option. Yes, I realize this was a poor choice...please don’t judge me.

                    Question 3: As I said, we have not missed a payment. Advice I’ve read here is just to stop paying on the credit cards you will file on. This is going to be hard for me. I am a teacher and I cannot have creditors calling me at work. Any advice on how to deal with calling creditors?

                    Ideally, I would love to file by the end of the month. If I’m correct, this would put our 531 meeting about 30 days out around the end of September. Is our pre-planned travel going to interfere terribly with the timing of this?

                    Waiting would be okay, expect for the creditors calling. We’d likely have to wait until December – February, and then we run into the tax return problem. We would likely receive a refund of approximately $4-5,000, which we would likely use to pay for my daughter's cheerleading program for the year and likely a down payment on braces for myself.

                    Any advice you can give would be appreciated, as I literally cannot sleep at night worrying about all of this. Thank you!
                    MeowGato,

                    I would like to share our story of a chapter 7 Bankruptcy with you. My advice is (do not waste your time, money, sleep and health or relationship" over money and a credit score. To read my entire bankruptcy story of how we got into, out of, and beyond our bankruptcy and what to expect at the 341 meeting.

                    Just click on my name and go to my posts and read "my bankruptcy story".

                    I wish you the best of luck! -Ryan

                    Comment


                    • #11
                      Thank you, that is great advice. I enjoyed reading your story and am happy to hear that your situation has improved for the better. I feel much better about the prospect of filing. We've decided to wait until early March, but I am looking so forward to not throwing an entire paycheck a month to credit cards.

                      Comment


                      • #12
                        Originally posted by MeowGato View Post
                        but I am looking so forward to not throwing an entire paycheck a month to credit cards.
                        If you know you are going to file, why are you still making credit card payments?
                        LadyInTheRed is in the black!
                        Filed Chap 13 April 2010. Discharged May 2015.
                        $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

                        Comment


                        • #13
                          About those collection calls, I wasted no time telling my creditors that I hired an attorney (I gave then atty name, phone number address and e-mail) and I was going to file BK. This was a month prior to actually filing. Most of my creditors stopped calling upon hearing that from me and was only told to provide the case number once I got it, which they would get anyway from the Court. If you do that when you hire an atty, just make sure he/she is OK with it prior to filing.

                          Comment


                          • #14
                            My perspective, you need to go on the trip prior to filing. Pay for everything on the trip in cash and do not take out any large cash withdrawals from your bank account, this means minimal spending money on the trip. Use your tax refund to pay for your attorney and exempt the rest, do not pay for cheerleading with this. Make sure you've met with an attorney and have a game plan in place.
                            Any information posted by me is for general informational purposes only. While I am an attorney, I am not YOUR attorney and any information I provide is not legal advice.

                            Comment

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