Using CC's and Chapter 13

[treehugger1]

I've found I needed to use a couple of credit cards to survive the past couple of weeks. If I file for 13 and the payback percentage is quite high, will I be in trouble for using the cc's? I am still putting off filing, although it appears no miracles are on the horizon, ha. I've estimated my own expenses and income and it appears I'll initially start a plan at 100% payback. This could change as my income (due to reduction in overtime) is beginning to come down. Every month that I can put off filing, I get down toward a more realistic income level. However, on occasion I find myself using a cc on occasion to make it through. Is this a serious problem? I'm not talking about a great deal of use, but I do need gas and have to travel to support my job. I notice that my attorney will not directly answer this question as the new law makes him a bit shy about offering "advice." He did tell me to "do what I need to do." This sounds pretty cryptic, but I think I understand his statements. Any comments from this board will be appreciated.

[Minnymouth]

You need to find a way to live within your income........

During banktruptcy you will not be in a postion to use credit cards or incurr more debt.

Deliberately using the cards now, knowing your not going to pay it back can be considered fraud...... and could result in dismissal of your case....

[helpless]

We used the credit cards right up until we filed. That being said, we were not behind on any of our bills, but was using cc for everyday necessities. Nothing was ever brought up or said. Good Luck.

[treehugger1]

I'm essentially in the same position. With the exception of one cc, I am not behind on any payments. All most all my cc have been up against their maximum for several years, and there is no credit card that has jumped even $100 in debt over any particular month. Other unsecured loans I am paying as agreed. A couple of finance companies allowed me to "refinance" in order to skip a payment. These folks can clearly see my financial issues and I have told them I am struggling. I have a few payday loans that I took out several months ago, to get through some lean months. I even have agreements worked out with all of them except one. I have nothing in collections and no judgements. It could be I'm just paranoid. I keep telling myself that I must not be at the bottom yet. However, I do want to cover my bases in case I need to file. Any recent use of my cc's is no different than my past use of 15 years. Another question that comes to mind is that I read on this forum where some folks simply stop making payments to unsecured creditors for several months prior to filing. Would this not be considered "fraud" that could lead to a case being dismissed? Or, is it less a concern in chapter 13?

[bkbiker]

Hi,

If you have any cash advances on your credit card, you should now wait at least 90days; if all you have are small normal charges for necessities you should be just fine.

However; what is your rush to file? Maybe take some time now to get everything in order for your long haul in chapter 13

Take care,

bkbiker

[treehugger1]

Having never been through something like this, or been behind on payments (this is definitely going to happen), I think I have a fear of creditors making my life miserable. Can I simply stop making cc and unsecured payments? I might not be able to make all my payments next month, and I'll just see more interest get added to my debt. Will it look bad to a trustee if I simply stop making payments? Or, is it okay to take a month or two in an attempt to get my financial life together? I'm just concerned that if I stop paying folks or just pay a few, this will look bad to the court. I definitely plan to cover my autos as these are secured and I don't need the risk of a repo.

[bkbiker]

Hey,

Once you are positively sure that you will be filing bankruptcy, than that is the time to just stop paying all your unsecured creditors that you will be listing on your bankruptcy forms. Take the next 3 to 12 months to get your act together, actuarially the longer you wait the least likely any one creditor will object.

Your credit score will go down the tubes, so take care of any financial issue before you stop paying them.

You can learn how to deal with phone calls and letters from your creditors in a way that empowers you.

The money now that you are not paying your unsecured creditors can be put to good use, get current on all your secured credit, take care of any needed dental care, and other medical needs you may have, get and keep health insurance, get your car running well or even maybe buy a new one (remember chapter 13 will probably be 5 years) you will learn quickly what is important.

Before I go on;

You said that you would be paying back 100%? How much debt do you have? What is your income? If you are planning on paying back all your debt anyway, why would you file bankruptcy?

After not paying your cc bills for many months, and your credit score going down the tubes, many cc companies will offer to settle your balance for much less than what you owe, than again they may just sue you. Most of my creditors sent me letters offering to settle for as little as 25% of what I owed.

Well take care for now,

bkbiker

[treehugger1]

BK, thanks for the comments. I have $150000 in unsecured debt ($75000 of this is student loans). I take home between $45K and $60K annually. I'm not a youngster and it would take me 20 - 30 years to pay back my debt. 13 would let me walk away in five years with no debt and I'd have a few more years to add to my retirement account. At this point, a credit score is only a number to me. I have a substantial amount of savings in retirement acounts that are protected in bankruptcy. Getting out from under the high interest on some cc's and high-risk unsecured loans will get me a great deal of freedom 5 years from now. I do realize that the 60 months of high payments $2300 - $2500 per month will be quite painful. On the other hand, this is actually less than my cumulative monthly payments now (All my cc's have increased to nearly 19+% and much of my unsecured is high-risk loans are 19 29%). I am probably a "model case" for the new law; I can "afford" Chapter 13 if necessary, I can repay nearly all my debt in 13, and I get relief. I currently have two high mileage vehicles that I hope would survive five years. It sounds as if it is possible for me to purchase a new vehicle and fend off creditors for several mroe months. My biggest fear is the "unknown." I have some loans through some very aggressive creditors, and even though they are legally not allowed to discuss my debt with anyone other than me, I've heard they sometimes try. This could be a disaster should they contact my employer. I do know the law in terms of debt collection, but that doesn't mean everyone obeys it. Again, I'm probably just paranoid. In terms of creditors writing down the debt, it is my understanding that the IRS is becoming more aggresive in taxing forgiven debt. I don't need that problem. However, you have given me hope that I shouldn't expect too many creditors to start bothering me right away. The middle of this current month will be the first month that I simply cannot pay everybody. Perhaps I'll let this go until I considerably aggravate someone. I appreciate your reponses. I know you have been through this.

[bkbiker]

Hi,

Thanks for sharing your financial facts, and yes I do understand where you are coming from; Suze Orman always says that if you owe more unsecured debt than the amount of money you make in a year; you are already bankrupt, so filing may be your best option.

If your job may be in jeopardy with your employer knowing about your debt, than the automatic stay protection you will receive from bankruptcy court will silence all your creditors. Bankruptcy is very public information so your employer may very well find out this information, just be prepared.

And yes the bankruptcy will stop all the interest on your debt, so perhaps filing sooner makes sense. I am little worried about your future income, you said that your income may be going down, so you would have to file a amended plan latter in your bankruptcy; just remember that this takes time and all your creditors will the opportunity to object to a lower payment, this is not a given.

Talk with a couple of bankruptcy lawyer, and remember that now because of the new laws in bankruptcy, most lawyer will no longer give you pre-bankruptcy advice about your debt and what would be in your best interest; for that information, you may need to come to our little forum here.

All in all for me after 5 years in chapter 13 (although difficult) I have exited in really good financial shape, I too have a nice retirement nest egg and my house has increased in value during these years.

Take care,
bkbiker

[treehugger1]

Thanks, BKBiker. This forum has been incredibly beneficial. After several initial consultations with BK attorneys, I have settled on an attorney. I respect his need to be careful under the new law. The great thing is that he is more than willing to answer "yes" and "no" type questions, so long as I am asking questions about the process of bankruptcy that cannot be construed to be "advice." Once I pay him to start the process, he will be more than willing to advise me in a manner that is beneficial to him and me. So, for now, I educate myself and phrase things in questions that have "factual" non-advice answers. This forum has been very helpful to me when formulating questions. The expected drop in income a few months from now is problematic, but I'll have to trust that my attorney maintains the local trustee is very open to modifications that continue to make the plan work.

Speaking of attorneys, I was totally unprepared for the variety within firms. It seems that the major firms were more intrested in just "signing me up," and at times I felt like they were only after my money. I bagged them and found an attorney who appears sincere and specializes in BK law. A good attorney is almost a prerequisite for a 13.

[bkbiker]

Hi,

Remember to be really generous on your expenses when you file your forms, your lawyer should know what would be acceptable.

You might also look into reducing your deductible on your health insurance, car insurance, and home insurance, other. Make them all $100 or less

Buying a car that will get you through 5 years of supervised bankruptcy,

Stock up on household goods; laundry soap, paper goods, office supplies, etc. , everything you do now will make your life easier in bankruptcy, remember when you list any of this stuff it is a yard sale prices.

You could probably put off your creditors for 2 months or so before they really started to hound you, put that money to good use also.

Create a filing plan that will really work for you, you don’t have to be on a 100% payback plan!

I glad you found a lawyer who is competent,

Take care,
bkbiker

[aa06a47]

BK, thanks for the comments. I have $150000 in unsecured debt ($75000 of this is student loans). I take home between $45K and $60K annually. I'm not a youngster and it would take me 20 - 30 years to pay back my debt. 13 would let me walk away in five years with no debt and I'd have a few more years to add to my retirement account. At this point, a credit score is only a number to me. I have a substantial amount of savings in retirement acounts that are protected in bankruptcy. Getting out from under the high interest on some cc's and high-risk unsecured loans will get me a great deal of freedom 5 years from now. I do realize that the 60 months of high payments $2300 - $2500 per month will be quite painful. On the other hand, this is actually less than my cumulative monthly payments now (All my cc's have increased to nearly 19+% and much of my unsecured is high-risk loans are 19 29%). I am probably a "model case" for the new law; I can "afford" Chapter 13 if necessary, I can repay nearly all my debt in 13, and I get relief. I currently have two high mileage vehicles that I hope would survive five years. It sounds as if it is possible for me to purchase a new vehicle and fend off creditors for several mroe months. My biggest fear is the "unknown." I have some loans through some very aggressive creditors, and even though they are legally not allowed to discuss my debt with anyone other than me, I've heard they sometimes try. This could be a disaster should they contact my employer. I do know the law in terms of debt collection, but that doesn't mean everyone obeys it. Again, I'm probably just paranoid. In terms of creditors writing down the debt, it is my understanding that the IRS is becoming more aggresive in taxing forgiven debt. I don't need that problem. However, you have given me hope that I shouldn't expect too many creditors to start bothering me right away. The middle of this current month will be the first month that I simply cannot pay everybody. Perhaps I'll let this go until I considerably aggravate someone. I appreciate your reponses. I know you have been through this.

I would take care of the vehical situation while your credit still is decent. Secured debt reduces the amount that goes to secured creditors, so if you feel you have 2500/month extra that will fund the chapter 13 plan, why not get two new cars now that will carry you through the 13. Your payment to unsecured will go down by the amount of your secured debt (say you have two 450/month car payments, suddenly your only paying the trustee 1600/month (2500-900 car payment).

As others have said, try and get yourself ready for the long haul. It is harder to get a new car after you have declared bk as you have to get approval from the trustee and you have to find someone who will loan you the money.

[davids]

creditors...

Having never been through something like this, or been behind on payments (this is definitely going to happen), I think I have a fear of creditors making my life miserable. Can I simply stop making cc and unsecured payments? I might not be able to make all my payments next month, and I'll just see more interest get added to my debt. Will it look bad to a trustee if I simply stop making payments? Or, is it okay to take a month or two in an attempt to get my financial life together? I'm just concerned that if I stop paying folks or just pay a few, this will look bad to the court. I definitely plan to cover my autos as these are secured and I don't need the risk of a repo.

If your BK is swift and you plan on taking action soon, then I would not
worry about the credtiors... I dont... they can sue me, they can pass
judgement on me in court, they can send me their threating legal letters, but bottom line is, my bank account is still empty... I should have filed before OCT 2005, and I would have been fine, im still kicking myself for not doing so... but if you plan on filing dont worry about it... dont continue to pay the creditors if you plan on filing, and let god sort it out.

[treehugger1]

davids, It's amazing how much I changed since I started the inital thread. I don't have any plan to pay anyone anything come the first of November. Too many other issues have to be covered, such as the head gasket blew on my 2000 Subaru yesterday afternoon and I intend to take any disposable income and repair it. In the past, I would have just charged it on a card and assumed I cover it "some day." I finally moved beyond that notion. In fact, I am now in a "cash" economy. If I perceive there is anything left for unsecured creditors, I'll send them each a morsel. I received my first collection notice from a collection agency this week, and it doesn't even bother me. There is nothing they can do to me before the first of the year (I'll reply and dispute the debt before 30 days and elect to make use of an additional 30 days to "research" their findings.) In fact, where I live they would be very lucky to get a hearing before a judge until the upcoming "holiday season" ends. I hear what you are saying about "should have filed earlier." I've had teh thought cross my mind many times the past several years, but I guess I had to reach my own version of rock-bottom.

[CAB_44]

Deliberately using the cards now, knowing your not going to pay it back can be considered fraud...... and could result in dismissal of your case....

Minny~ while I know this is true what you said here...I have a concern~
how about the fact that I have retained a lawyer, yet have put off filing until Dec., but in the mean-time I am not paying those creditors any money~ well MOST of them, there are some that I never got behind on and can pay off little by little until we do file~ but won't they consider that to be fraud if I am getting a bi-weekly paycheck, and not paying my CC's but using that money for "other" things?? Won't that be construed as fraud?? Won't they look at that as Well, you could've been paying some of it????!!
Anyone???
Thanks!