what are the chances of getting denied a chapter 7?

[sofarindebt]

We refinanced in January 06 and paid off ALL credit card and loan debt - ZERO debt. One week after filing my husband lost his job......great. So for the next 5 months we used cash advances to pay our $3000/month mortgage and other expenses.

My question is, will they think it is fraud of we racked up all this debt in just one year? I also have about 2 credit cards I opened, and have never made one payment on them........the reason being I entered into this debt settlement program, I had to pay about $500/month to get $30K of debt paid off for 3 years..........after 2 months couldn't afford that so by that time the cards I never paid had like $800 balance owed. Will they look at this like fraud or will I have a chance to explain myself?

Thanks! Also, I took out a cash advance for $5000 in August, so my attorney advises us not to file until January, does this seem right?

[lrprn]

SFID, my answers to your questions are below in red....

We refinanced in January 06 and paid off ALL credit card and loan debt - ZERO debt. One week after filing my husband lost his job......great. So for the next 5 months we used cash advances to pay our $3000/month mortgage and other expenses.

My question is, will they think it is fraud of we racked up all this debt in just one year? If questioned, as long as you can prove everything with receipts, loan papers, etc, then you should be fine. I also have about 2 credit cards I opened, and have never made one payment on them........the reason being I entered into this debt settlement program, I had to pay about $500/month to get $30K of debt paid off for 3 years..........after 2 months couldn't afford that so by that time the cards I never paid had like $800 balance owed. Will they look at this like fraud or will I have a chance to explain myself? Since you opened the cards and charged on them but never made a payment, that might look suspicious. The more time that goes by before filing, the better.

Thanks! Also, I took out a cash advance for $5000 in August, so my attorney advises us not to file until January, does this seem right? The reason your lawyer doesn't want you to file for six months is because the large $5K cash advance will count into your "last six months of income" total for your bk forms - you don't want that to happen. How did you get the $5K cash advance?

A few more observations....you need to stop using your credit cards completely at least 90 days before filing. That way if there is any suspicion of fraud, then you put the burden to prove it on the trustee.

Whether you can file a Ch 7 or not depends solely on the outcome of the Means Test. Has your lawyer told you that you qualify for a Ch 7?

Truly I'm not trying to be critical and please don't take offense, but I do have a hard question to ask you. If your home is costing you $3000/month and you are refinancing and borrowing in an unstable employment situation to continue to make that payment to keep it, you seem very 'house-poor'. Is keeping a house that is dragging you under financially to the point of bankruptcy worth it? Have you considered selling the house and starting over with a more reasonable living space before filing bankruptcy?

Hope this helps answer your questions. Please post anytime you need information or just want to vent- that's why we're here.

[HHM]

What your attorney tells you is correct, the earliest you could file is next year, and even then, you are not out of the woods.

I agree with lrprn, you need to seriously reconsider your financial situation...I understand your husband lost his job; but honestly, that generally doesn't happen out of the blue. And a $3000 dollar monthly mortgage probably means you have a house that is worth about 1,000,000 (or at least was when you bought it), or you are getting a seriously bad interest rate.

The means test is the other factor probably delaying your filing...is that income is based on the last six months worth of income.

Ultimately, if your husband cannot find a new job...bankruptcy may be an option, but with the decisions you have made so far, you won't be able to file until next year.

[aa06a47]

My advise will differ from lrpn and hhm's just a bit. I would get through and qualify for the chapter 7 with the hugh mortgage payment. If you reduce your secured payments, it could throw you into a 5 year chapter 13 plan. If you chose to sale your home after your bk then do so. Your income must be pretty high to qualify for a 3k mortgage payment. (If my mortage payment would have been about 300/month more than it is, I would have qualified for a chapter 7...instead I'm in chapter 13 for 5 years)

[razorguns]

passing a chap 7 - really is about 'meeting requirements' more than anything.

And these rules are set universally across the nation. It's not like a judge goes 'eh, this person can pay it off' and just stamp dismiss.

Tho trustee's have a more personal role - and their job is usually to scrutinize and demand more documents to 'fit these requirements'

Which is why, a good bk lawyer - fits your application perfectly to what is necessary to facilitate a bk. While the trustee goes through it and ascertains basically if it's real or not.

So 'why u made that debt, your state of mind', etc. are emotional issues and have nothinhg to do with your bk case. You could go bankrupt just buying lima beans for 10 years.

r

[sofarindebt]

Thanks everyone, to answer a few questions

we owe $460K on our home, 1st mortgage at 6.5%, second at less than 8%.

We both made obout $115K/year when we purchased the home, which was only $370K, but after we refinanced it was fine. We have tried and tried to sell it, was on the market for 7 mos and only one showing. It may be a bit overpriced but we can't lower it more w/out having to pay.

We definitely qualify giving that husband makes 65K/year and I have no income - stay home and take care of our 3 kids.

I am just concerned they will think we are committing fraud when we didn't, just needed money to pay our bills and it added up fast!!!

[HHM]

I am just concerned they will think we are committing fraud when we didn't, just needed money to pay our bills and it added up fast!!!

That is the main issue...which is why you have to wait until next year, you have racked up too much debt in too short a time to file this year. You could technically still file a chapter 7, but you would probably be forced to reaffirm some of those debts, i.e. the $5000 cash advance. Also note, there are two types of BK fraud...the intentional and the ignorant. Intentional is when you really did defraud a creditor or are abusing the BK system, the ignorant (which usually only happens with debtors who represent themselves) is when someone charges a few thousand dollars on a credit card just before filing BK and didn't know the rules. I honestly wish they would use a word other than fraud to describe this second scenario.

In the first type of fraud, (i.e. real fraud and BK abuse), those charges come from the US Attorney's office (and these situations rarely occur), the second type of fraud is enforced by individual creditors who don't want their debt discharged because it meets the standards of non-dischargeable debt, (i.e. you used the card within 90 days of BK). Your situation is more along the lines of this second problem. Thus, even if you were to file BK today, your only downside is you would still have to pay back some of your recently incurred debt.