Credit Card - I overstated my income

[JustDo]

Hello,
I have 67k in credit card debt. One card which I opened six months ago has 18k on it and I greatly exaggerated my household income. All of my other cards are legit. Any suggestions besides going to confession?

[HHM]

You should probably wait to file BK and you must stop using credit cards.

Because it is so recent, there is a greater than average risk that someone at the credit card company may look at your application history and compare that to your BK petition. An objection to dischargeability of a debt is if the debtor committed fraud in obtaining credit (i.e mistating income on the application).

But, those sorts of objections are rare, but if you charged $18K in 6 months, and turn around and file BK, this creditor will more than likely get involved anyway because of the large amount of debt incurred in a short amount of time. (notwithstanding the income issue).

[GoingDown]

Out of curiosity, about how long should they wait before filing BK to minimize the risk of an objection?

Once the debts get sold to junk debt buyers (about 6 months to one year after you stop making payments), are the junk debt buyers likely to object?

What about after they get a judgment... are they likely to object at that point?

I've heard that in theory, they could ask to see 4 years of income tax returns, which would mean that you could wait about 5 years after you made your last credit card purchase, and then file BK, and they wouldn't be able to object because they couldn't demand to see your income tax return for the year you made the credit card purchases and didn't have enough income to repay them.

[HHM]

The OP is still a little ways off from the debt getting sold to junk debt buyers.

The OP has two problems and a possible third.

1. Accumulation of significant debt ($18K) over a relatively short time period, 6 months. That fact is objectionable in its own right.

2. Overstating income on the application to obtain credit. That is just plain fraud, whether in BK or not. I suppose it depends how much of an overstatement (i.e. if you earn $34,000 per year, and you put $36,000, probably not an issue, but if you earn $34K, and you put $60K. that would be a problem).

3. Did the OP make any payments to this credit card? If the OP has not been making at least the minimum payments consistently, that is also fraud.

And since this $18k represents roughly 1/3 of this persons debt, a BK now, probably won't be very beneficial. The main problem is the amount of debt is significant, even waiting a year is no guarantee.

[Lindsay]

Our credit cards are mostly 8 to 10 years old. What I wonder about credit cards and income is that when we started with most of our cards, the limits were around $2000 or $3000. Over the years, the limits would raise without any inquiry of our income. Some of the cards that were originally $2000 went up to $15,000 and $20,000 limits. We never asked them to raise our limits and they never asked about our current income when they would increase credit. It was always just automatic. I wonder how much creditors actually rely on the income or if they just use the credit score. When we got our credit cards years ago, we stated a $30,000 income, which was accurate at the time. When the limits were raised many times over the years, they didn't know if we made more money, less money, or if we even still had jobs. A local car dealership let us drive away in a $35,000 brand new truck with no down payment and 1.9% interest (financed directly through the auto maker) and we had a low yearly salary (less than $30,000). I'm certain that this was based only on our credit score. I look upon that truck purchase as my crowning moment of stupidity. It didn't completely cause the bankrutpcy, but it sure didn't help matters.

[JustDo]

Follow up question

A folow up question:
I have the capability to spread this 18k over 3-4 different cards in the form of balance transfers. Should I do that and try and wait it out 6 months before filing?

[Hollyhomemaker]

My thoughts......

Yes, overstating one's income is considered fraud, but if we are talking in realistic situations then the credit card company is hardly likely to object on grounds of overstated income.

Laws about fraud in overstating one's income is generally geared towards loan applications to obtain a house or a car or a money loan. Credit card application stated incomes are not really the main focus of the fraud laws.

My attorney said that most credit card companies do not object to a person's BK, and that they spend more in postage then they would about worrying about any individual's bankruptcy. Yes there are the exceptions.

Also, when I obtained my 80K in total credit lines (I am about $25k in c.c debt) our household income was a lot higher because we were a dual income household at the time, which was several years ago, but even if it was less than a year ago most credit card applications ask for total household income ("household income" and what that exactly constitutes gets debated and bantered around on many message boards....) and c.c companies would have to make a real effort to find out who was in your house at the time and who contributed to your total income because on credit card applications they don't ask you to state the individuals living with you that contribute to the total household income.

Do you have any idea how many people fudge the numbers when it comes to credit card apps? I am NOT saying it is right or that anyone should do it, but it happens all the time.

Every BK lawyer blog that Ive gone to says that after about 6 months since last c.c usage, credit card companies barely make a peep, because the law is 70/90 days. And the burden is on them to prove fraud after that time. My lawyer told me that he has never had a credit card company object when the total balance was less than $15,000, as long as it was after the 70/90 days, and if the balance was more than $15k as long as it has been 6 months.

Of course your mileage may vary.......

We can always go over the worst case scenario and while I think we should all be aware of the worst case scenario we shouldn't be here scaring the crap out of people when the realistic outcomes are far different than the worse case scenarios we think up or hear about from time to time.

[Hollyhomemaker]

A folow up question:
I have the capability to spread this 18k over 3-4 different cards in the form of balance transfers. Should I do that and try and wait it out 6 months before filing?

Balance transfers are even worse. Doing that is sure to anger your credit card companies because all of that debt is considered new debt to the credit card company getting the new balance.. If you do any balance transfers I would wait a minimum of 6 months after that to file.

Certainly having $18k spread over several cards is a lot easier to BK then one card with an $18k balance, but if you are going to file BK and you know you are it's better to lay low than to stir up the hornet's nest with a BT.

[HHM]

Bottom line, you need to wait. I agree with Holly in that the odds of an objection based solely on misstated income are low...but given the other circumstances (high debt, short time), the misstated income is one more log on the BK fraud file.

As for the $15K amount...that is a bit of an optimistic generalization, I have seen creditors (chase, citi, discover, etc) object to as little as $2,000 falling outside of the 70/90 day period.

But you are correct, for most credit card companies, the general consensus is that they tend not to challenge a debt that is older than 6 months...the only problem in this case is that this is relatively NEW credit, i.e. the card itself is only 6 months old. Thus, JustDo should probably wait at least another 6 months before doing anything.

Also, doing balance transfers at this point is more problematic as has already been pointed out.

[GoingDown]

Bottom line, you need to wait. I agree with Holly in that the odds of an objection based solely on misstated income are low...but given the other circumstances (high debt, short time), the misstated income is one more log on the BK fraud file.

As for the $15K amount...that is a bit of an optimistic generalization, I have seen creditors (chase, citi, discover, etc) object to as little as $2,000 falling outside of the 70/90 day period.

But you are correct, for most credit card companies, the general consensus is that they tend not to challenge a debt that is older than 6 months...the only problem in this case is that this is relatively NEW credit, i.e. the card itself is only 6 months old. Thus, JustDo should probably wait at least another 6 months before doing anything.

Also, doing balance transfers at this point is more problematic as has already been pointed out.

Yes, I've heard of the original creditors such as the credit card companies objecting, but has anyone heard of junk debt buyers, such as LVNV, objecting?

By the time it gets to a junk debt buyer, do they bother with the expense and effort of objecting?

I'm just asking if anyone has heard of junk debt buyers fighting against someone filing BK. I would think by the time it gets to them, it would be very difficult for them to be able to prove any fraud to the BK court, because for one thing, they weren't the ones who extended the credit in the first place and they may not have any documentation to support their claim.

[HHM]

Yes, I've heard of the original creditors such as the credit card companies objecting, but has anyone heard of junk debt buyers, such as LVNV, objecting?

By the time it gets to a junk debt buyer, do they bother with the expense and effort of objecting?

I'm just asking if anyone has heard of junk debt buyers fighting against someone filing BK. I would think by the time it gets to them, it would be very difficult for them to be able to prove any fraud to the BK court, because for one thing, they weren't the ones who extended the credit in the first place and they may not have any documentation to support their claim.

It would be very rare for a Junk Debt buyer to file an objection in a BK Case and I haven't heard of it happening. Mainly because by the time the debt goes to a junk debt buyer, the debt is usually well over a year old if not older. There is no legal reason they could not object, a junk debt buyer inherits the rights of the original creditor, but from a practical standpoint, the junk debt buyer usually does not get enough account information to even formulate an objection.

I have seen some junk debt buyers (E-Cast Settlement) file a notice of appearance in cases, but primarily they do so to see if the case gets designated an asset case, and not to file an objection.

[magyar123]

Credit card applications - if you apply in your name only - have a box for your salary from your job. The "total household income" figure though could be significantly higher if you are married. Say you make $25,000 a year, and your spouse also $25,000. Even though you might not make your spouse a joint applicant, you can always put $50,000 into the "total household income" box.

[Lindsay]

Credit card applications - if you apply in your name only - have a box for your salary from your job. The "total household income" figure though could be significantly higher if you are married. Say you make $25,000 a year, and your spouse also $25,000. Even though you might not make your spouse a joint applicant, you can always put $50,000 into the "total household income" box.

That's how I always thought it worked too. I've heard about college students living at home applying for credit and using their parents (household) income on the application. I'm sure thats probably how the cards want it or they would specifically ask for job salary only for the individual.

When we refinanced our mortgage, the company wanted 2 years of bank statements to actually see our cash flow and to prove that we had the correct amount of money stated coming in each month.

[magyar123]

That's how I always thought it worked too. I've heard about college students living at home applying for credit and using their parents (household) income on the application. I'm sure thats probably how the cards want it or they would specifically ask for job salary only for the individual.

When we refinanced our mortgage, the company wanted 2 years of bank statements to actually see our cash flow and to prove that we had the correct amount of money stated coming in each month.

Huge difference between a credit card application and a mortgage refinance application. Credit card applications have an area for the applicant's salary from his/her job. The "total household income" figure includes income from all sources, your salary + anyone else's salary(ies) living with you. If your salary is $25,000 a year, but you share your living space with 3 more individuals, each also making the same, $25,000, your total household income would now be $100,000.

[jp2861]

Huge difference between a credit card application and a mortgage refinance application. Credit card applications have an area for the applicant's salary from his/her job. The "total household income" figure includes income from all sources, your salary + anyone else's salary(ies) living with you. If your salary is $25,000 a year, but you share your living space with 3 more individuals, each also making the same, $25,000, your total household income would now be $100,000.

Thats a bogus statement! So not true. Household income means monies available to pay the debt. Unless all the parties (income earners) involved have agreed to take responsibility for the debt their income does not count.

Husband and wife, sure add the total.

2 roommates, sorry their income doesn't count unless they've agreed to pay your bills. Without legal documentation of them taking financial responsibility that dog just won't hunt.