cash advances more recent than I thought!

[jp2861]

You are just going to have to find a way to pay it if it comes down to it. They don't care where you get the money. You spent it so pay up.

The question was for a friend. I could care less in my case. 100% of my income is protected. So, I won't be "paying up" for anything. Thanks anyway.

[HHM]

I'm not talking about settling as an alternative. That hasn't crossed my mind. If I have $150 disposable cash to make the monthly settlement payment I'm not in a Ch7 anymore. So,once again, my question is this. If someone is filing a Ch7, I'm assuming the disposable income, after filing both schedules, is less than $100. How does a settlement come into the picture when there isn't any disposable income to make the payment? On one hand the rule is to have less than $100 disposable income left over, on the other hand there is talk of settling while the BK is still being processed. How is a settlement even possible when the cash flow isn't there. Or, is the settlement process geared more towards a Ch 13?

nc73 is correct...at some point, if you agree to the settlement, you need to find the money. If you DONT settle and the creditor wins the objection they now have a judgment that can NEVER be discharged...guess what happens then...wage garnishment, liens, etc. Even though the budgets for BK seem tight, most half way decent lawyers do pad the expenses, so there is some wiggle room. And once the burden of other debt gets lifted, many people find they have more money than they thought.

In the end, if a creditor has a valid objection, you have two choices, settle for the lesser amount and the payment plan, and try to pay...or let the creditor take it to court, have the full amount plus interest levied against you and have your wages garnished, or worse.

[nc73]

I'm not talking about settling as an alternative. That hasn't crossed my mind. If I have $150 disposable cash to make the monthly settlement payment I'm not in a Ch7 anymore. So,once again, my question is this. If someone is filing a Ch7, I'm assuming the disposable income, after filing both schedules, is less than $100. How does a settlement come into the picture when there isn't any disposable income to make the payment? On one hand the rule is to have less than $100 disposable income left over, on the other hand there is talk of settling while the BK is still being processed. How is a settlement even possible when the cash flow isn't there. Or, is the settlement process geared more towards a Ch 13?

You are just going to have to find a way to pay it if it comes down to it. They don't care where you get the money. You spent it so pay up.

[jp2861]

I'm not talking about settling as an alternative. That hasn't crossed my mind. If I have $150 disposable cash to make the monthly settlement payment I'm not in a Ch7 anymore. So,once again, my question is this. If someone is filing a Ch7, I'm assuming the disposable income, after filing both schedules, is less than $100. How does a settlement come into the picture when there isn't any disposable income to make the payment? On one hand the rule is to have less than $100 disposable income left over, on the other hand there is talk of settling while the BK is still being processed. How is a settlement even possible when the cash flow isn't there. Or, is the settlement process geared more towards a Ch 13?

[HHM]

Catch 22 either way. If I have the cash to settle I must not be bankrupt, right. If I have the cash to settle then why am I late on my minimums? Settling as part of the bankruptcy sounds a little sticky to me, or I just don't understand how it works. It just seems like if someone has the cash to settle within the BK then they must have the cash to be current on payments. How can someone have the cash to settle and still be claiming BK? Wouldn't that cash be an asset that the trustee could take and disperse among all creditors? Or, would a settlement be looked at like a preferential payment? How could someone justify making a settlement payment to one creditor and filing for a discharge on the others? Sorry for all the questions but something with this idea of settling while still in BK proceedings seems strange to me.

You're confusing "debt settlement" as an alternative to BK, vs...settling a creditors objection to discharge of their debt with in BK.

So, FOR THE LAST TIME...When you file BK, if one of your debts satisfies certain conditions (there are plenty of other threads that talk about why a creditor might object), it is possible that a creditor may object to the discharge of that debt. Note, this all takes place AFTER the debtor files BK. However, nearly every creditor will offer the debtor some sort of settlement to avoid going to the trouble and expense of having a hearing before the BK judge. Almost without doubt, the settlement is a "payment plan". Objections to discharge mostly arise in chapter 7...the creditor understands that the debtor will have little or no cash assets (and if they did, odds are, that asset would be non-exempt and the trustee would get it). The legal mechanism for settling an objection to discharge is a reaffirmation agreement (assuming no objection has actually been filed...if the objection has been filed, then the mechanism is a Stipulated Judgment, but the net result is the same).

For example, if a creditor threatens to object to discharge of $3,000, a typical reaffirmation would be $1,500 paid at $150 per month for 10 months. The remaining $1,500 is discharged, and because it is discharged in BK, there is NO TAX LIABILITY on that forgiven debt.

[jp2861]

If the debt is settled as part of a reaffirmation agreement within a BK (i.e. to prevent an objection to discharge of that debt), there is NO Tax Liability.

Catch 22 either way. If I have the cash to settle I must not be bankrupt, right. If I have the cash to settle then why am I late on my minimums? Settling as part of the bankruptcy sounds a little sticky to me, or I just don't understand how it works. It just seems like if someone has the cash to settle within the BK then they must have the cash to be current on payments. How can someone have the cash to settle and still be claiming BK? Wouldn't that cash be an asset that the trustee could take and dispurse among all creditors? Or, would a settlement be looked at like a preferential payment? How could someone justify making a settlement payment to one creditor and filing for a discharge on the others? Sorry for all the questions but something with this idea of settling while still in BK proceedings seems strange to me.

[HHM]

If the debt is settled as part of a reaffirmation agreement within a BK (i.e. to prevent an objection to discharge of that debt), there is NO Tax Liability.

[PaKettle]

Taxes due on the difference if you settle out of court for a lower amount than the balance. I guess if you settle out of court it's considered income and taxable. After talking to my attorney today he wants to give my case a few more months before filing. I have quite a bit of shuffling between my accounts, as well as few cash advances. He feels my chances are better to avoid and objections or adversary actions if I file closer to the 6 month mark. I hope he knows what he's doing...lol.

Sounds like you're pretty much in the same boat as me in that regard. Let's hope our boat arrives safely to that great destination: Full DISCHARGE!
Best of luck!

[jp2861]

Taxes that would be due?
I might be in the same boat as you. IF they object, I cannot really afford to pay any monthly payments, so I might have to just fight them in court, serving as my own defense attorney, and hope the judge takes mercy on me.

Let's hope it doesn't come to that!

Taxes due on the difference if you settle out of court for a lower amount than the balance. I guess if you settle out of court it's considered income and taxable. After talking to my attorney today he wants to give my case a few more months before filing. I have quite a bit of shuffling between my accounts, as well as few cash advances. He feels my chances are better to avoid and objections or adversary actions if I file closer to the 6 month mark. I hope he knows what he's doing...lol.

[PaKettle]

[snip] For me, settling any out of court isn't an option because I can't afford the settlement payments or the taxes that would be due. So, if I do get any objections I will have to try to deal with that without a lawyer. I'm at the point where I'll just have to see where the cards fall. Not much more I can do other than drag it out longer, which I don't think will make much difference.

Taxes that would be due?
I might be in the same boat as you. IF they object, I cannot really afford to pay any monthly payments, so I might have to just fight them in court, serving as my own defense attorney, and hope the judge takes mercy on me.

Let's hope it doesn't come to that!

[HHM]

Just to make sure there is no confusion about the settlement issue in this context...

When we discuss "settling" with an objecting creditor in BK, it is done by reaffirmation agreement, and that agreement gets filed with the BK court. Thus, the settlement is done "within" the Bankruptcy. What the reaffirmation agreement avoids is an actual hearing (mini-trial) about whether the debt is dischargeable. As a result, there is no "forgiven" tax liability.

So, when we say you have 3 options when a creditor threatens an objection IN your BK.
1. Do nothing and see if the creditor will actually object.
2. Negotiate a settlement
3. If the creditor does object, fight them in court.

Option 2, if successful, results in a reaffirmation agreement that gets filed with court thus, strictly speaking, the settlement is not "out of court". Thus, there is no tax liability. But, granted, if you cannot afford the terms of a settlment, then you have no choice but to take option 3.

[CATCHMEIFYOUCAN]

WELL SAID !

"Bottom line is nobody really knows for sure how any filings will turn out. You can predict and rationalize all day but until you file you won't know. Statistics show that most fly without a hitch. I have a bunch of transfers and cash advances before the 70/90 period and will just have to deal with objections, if they occur. For me, settling any out of court isn't an option because I can't afford the settlement payments or the taxes that would be due. So, if I do get any objections I will have to try to deal with that without a lawyer. I'm at the point where I'll just have to see where the cards fall. Not much more I can do other than drag it out longer, which I don't think will make much difference."

[jp2861]

Bottom line is nobody really knows for sure how any filings will turn out. You can predict and rationalize all day but until you file you won't know. Statistics show that most fly without a hitch. I have a bunch of transfers and cash advances before the 70/90 period and will just have to deal with objections, if they occur. For me, settling any out of court isn't an option because I can't afford the settlement payments or the taxes that would be due. So, if I do get any objections I will have to try to deal with that without a lawyer. I'm at the point where I'll just have to see where the cards fall. Not much more I can do other than drag it out longer, which I don't think will make much difference.

[CATCHMEIFYOUCAN]

Im better off

Actually, LUCKIER now at the present moment. BK gave me the FRESH Start I needed. But I'm still a gambler just under control.

GOOD LUCK, Catchmeifyoucan !

[PaKettle]

Guess you were unlucky in gambling, but lucky in bankruptcy!

Catchmeifyoucan here,

Just my experience, I mostly used my unsecured credit for cash advances the past several years before I filed. Even took out consolidation loans to pay them off only to rack them up.

But at the same time I was paying them back in a timely manner all due to casino or lottery hits, up until the time I had to file - things started getting tight, my luck was running out.

I had 2 credit cards and 1 consolidation loan from the same credit union.

I barely made one payment on a cc I had just aquired in the month of April 06 (I ended up filing July 06) I blew the whole line of credit $10,000 in less than a month).

I filed for Ch13, so that kind of saved me from objections (I GUESS). Creditors seeing that I filed for Ch13 from the beginning, saw that I was going to be paying them back through the plan, no objections at the 341 meeting and no questions about the advances or gambling sprees from the Trustee (just my luck I GUESS).

3 months later I converted to Ch7 (because I dropped one full time job which put me below the median income for my state). Another 341 meeting held and no objections and no Trustee questioning anything outside the norm.

You take the risk and prepare for the worst, I figured well if I can file BK and be able to discharge most of my credit GREAT, even if I expect to some of the creditors back, that is still the risk I was willing to take. THANK GOODNESS, I got a discharge of everything.

Best of LUCK, Catchmeifyoucan