More CC questions.

[Emmy]

First off I just cut up every single cc we own. I really wanted to keep making minumum cc payments until we file because our cards right now are maxed.
I just figured out our expenses for next month and after paying all of our bills, we have $287 for food and gas for the month. No way we are going to make it with no cc's to depend on.

My husband says well, we just won't pay on one of the cc's. Wouldn't that be preferential treatment of the ones we do pay? Dh thinks we will just tell them that we payed what we could..

Another question, how will the trustee/creditors look at us if we stop paying cc's when they are maxed? When we file, if they look back on a year they will see no cc's purchases for the past 6 months and the 6 months before that will be all gas, food, dental and car repairs. I'm really worried though that they would be give us a hard time because we stopped paying at a point when the cards are maxed.

Just thought of something else, would it be better to make small payments on all our cc's equally even if they are below minumum than paying some and not others?

[lrprn]

First off I just cut up every single cc we own. I really wanted to keep making minumum cc payments until we file because our cards right now are maxed.
I just figured out our expenses for next month and after paying all of our bills, we have $287 for food and gas for the month. No way we are going to make it with no cc's to depend on.

My husband says well, we just won't pay on one of the cc's. Wouldn't that be preferential treatment of the ones we do pay? Dh thinks we will just tell them that we payed what we could..

Another question, how will the trustee/creditors look at us if we stop paying cc's when they are maxed? When we file, if they look back on a year they will see no cc's purchases for the past 6 months and the 6 months before that will be all gas, food, dental and car repairs. I'm really worried though that they would be give us a hard time because we stopped paying at a point when the cards are maxed.

Just thought of something else, would it be better to make small payments on all our cc's equally even if they are below minumum than paying some and not others?

Emmy, if you are sure you are going to file within six months, you can stop paying on ALL of your credit cards now. Use that money to get ready for bankruptcy instead - catch secured loans up, get health insurance, make car repairs, replace clothes, repair or replace failing appliances....you get the picture. This is what our lawyer recommended when we were preparing to file Ch 13. We didn't pay a single unsecured creditor for five months - it really helped us get our mortgage current, catch up on car payments, buy new clothes for the first time in a year, etc.

If you aren't going to file within six months, then consider rotating paying each credit card every other month and ignore the calls and threats inbetween from those that didn't get paid. Preferential treatment is presumed when you pay one unsecured creditor more than $600 within 90 days of filing without paying the others. As long as you don't pay one creditor consistently over another, then I don't see how the trustee could prove preferential treatment. And the trustee couldn't care less when you stop paying your credit cards. It's very typical for the majority of us that file to stop paying with our cards maxxed out up to 12 months before filing.

Of course, ask your lawyer what is best for you in your unique circumstances. Just don't fall into the trap of thinking that paying your non-secured creditors their regular payments right up until you file somehow makes your bk go better - it doesn't. It just wastes money that could be better spent preparing your family to weather the bk storm.

[Emmy]

Thank you lrprn! We really do need that money for most of the things you've mentioned and I don't see how we will be able to survive without dropping at least some of the cc payments. I'm actually scared of not paying, it feels like a huge step towards bk process and one of no return. That is ok, just hard on the emotions. I keep going up and down, one minute I'm feeling relieved that eventually we will come out the other side of this (hopefully!) and the next I'm just really anxious about all of it.

We don't have a lawyer yet. We are planning to wait until we get our tax return to go see one. The reasons are so that we can spend part of it on car repairs and part on the lawyer.

[HHM]

If you are going to have to file BK anyway, you are throwing money down the toilet by making payments to ANY credit cards.

Stop paying your credit cards, and get prepared to file BK, (sooner, rather than later.)

[lrprn]

We don't have a lawyer yet. We are planning to wait until we get our tax return to go see one. The reasons are so that we can spend part of it on car repairs and part on the lawyer.

Don't wait to start interviewing bankruptcy-specialty lawyers, Emmy. Most give a free half-hour to hour consultation with no expectation they will be retained (and if one of them pushes you hard in that direction, they are likely not the lawyer for you). Make appointments with at least 3-4 in your area and here's a link that explains what most lawyers want you to bring with you - http://kennethbrock.blogspot.com/200...-attorney.html . You will learn a great deal and get a sense of who you would like to work with and who is trustworthy. It's well worth the time!

If you find a bk lawyer you want to work with, then you'll know how much the fees will be and have someone to ask questions as they arise after you retain them. Bk lawyers are used to clients who have no money, so many allow payment plans. It never hurts to ask what's possible. Also if you can find a bk lawyer who used to be (or still is) a trustee in your area, then that's about as good as it gets!

Here are a few good websites that explain what to look for in a good bk lawyer and what to ask during the first consultation:

http://moranlaw.net/interview.html

http://moranlaw.net/selecting.htm

http://bankruptcy.lawyers.com/Bankruptcy-Preparing-to-Meet-with-a-Lawyer.html

And when bk is concerned, going with the lowest cost attorney is not a good idea. See http://articles.moneycentral.msn.com...tcyAdvice.aspx for what happened to one family who did and regretted it.

Hope this helps, Emmy! Keep us posted on what happens with your situation, ok?

[Emmy]

Thanks for all the links! I'm really eager to start looking around but my husband is hesitant to go bk lawyer shopping this early and he isn't budging on it. He thinks because we are waitng 6 months to file it would look bad to try and find one this early on. The plan right now is to start interviewing the start of Feb. That will still be 2.5-3 months before we actually file, I'm hoping that will be enough time.

[HHM]

First off, what kind of car repairs need to be done that you can actually wait 5 months to do?

Since your time-line to filing is more extended than most, here is some useful info.

If you were to stop paying your credit cards...
1. You don't need to worry about being sued or having your wages garnished, the average time-line from first default (i.e. the first month you stop paying) to lawsuit is 12-18 months.
2. However, you will have to tolerate all kinds of collection efforts...constant phone calls starting at about 3 months, and depending how much info they have on you, calls to relatives or employers at about 8 months. But, such a situation is mostly a minor inconvenience.
3. The only draw back to not paying is that you will incur negative payment history on your credit report, which, despite your filing BK, can fairly be reported on your credit report for 7 years. However, given your financial situation, your credit rating is the LEAST of your worries and should never factor into any decisions regarding BK. Your filing BK after all, your credit will be shot anyway.
4. There is absolutely no benefit to paying "some" cards and not others...the debt on all your credit cards will be discharged in BK, and all the banks holding your credit cards will cancel the cards.

5. Since you said you can't pay for your basic lifestyle and pay minimum payments on your credit cards, I don't see that you have any real choice but to stop paying...and you absolutely, positively do NOT want to start paying one credit card with another or paying your bills with your credit cards.

I hope this helps....Having been on this site for a couple years, the main problem people have when first considering BK is facing the reality of their situation...there is lots of denial and skewing of priorities. Your only priority is to make enough money to pay for your basic necessities, in short, to LIVE WITHIN YOUR MEANS...the toughest thing people have letting go of is their credit rating because most people have bought into the credit industries idea that your credit rating is the end all be all of your financial lives...don't do it. When you are going down the BK road, you should never give two thoughts to your credit rating (you deal with that AFTER you are discharged from BK).

[Emmy]

Thanks HHM. My car has no heating/defrosting or air conditioning and we live in the midwest so during the peak of winter and summer, I can't use the car. It's also just not safe when it's foggy/humid and I need the defroster. We won't be waiting 5 months though, 3 months tops. We get our refund as soon as possible, usually by the first week of Feb it's direct deposited.

Your post is right on target. We will have to stop paying our cc's and we don't have a choice. I thought we'd be able to scrape buy and budget hardcore to pay for groceries and gas while still paying them but really I just can't make the numbers work. We were already using cc's the last few months to pay for utilities, groceries, and gas.

You're also right in the fact I'm worried about our credit score. I keep wanting to pay the cc's minumum to protect that and make it "better" for after bk.

Your post has helped lots and is right on target for me on all counts.

[CAB_44]

If you are going to have to file BK anyway, you are throwing money down the toilet by making payments to ANY credit cards.

Stop paying your credit cards, and get prepared to file BK, (sooner, rather than later.)

HHM IS RIGHT~
STOP throwing MORE money away~ get on with your life and get the things that you NEED now!!!!!!!

[treehugger1]

Emmy,

Welcome. You are getting solid advice from all. I paid my cc's right up until last month and now regret not putting the cash to better use. I'm going into chapter 13 real soon, and I won't pay anyone (other than my secured loans) another cent. They will get their money from me in the 13 (I'll pay back nearly 100%). It won't hurt them to wait on me. Find empowerment in the notion that YOU are temporarily in control of how your money is spent, not the cc folks.

Best to you.