Potential Dilemma?

[seanf12]

We are planning on filing Chapter 7 in early June (due to a recent cash advance, our lawyer advised us to make 3 months of payments to that creditor). Right now we pass the means test and show slightly negative income on schedules I & J.

There is a possibility that my income will be increasing by as much as 5% (approx. an annual increase of $4500 for me). We would be notified by our managers what that increase will be beginning June 25th, and we would see it in our paychecks beginning July 11th.

Assuming our 341 meeting wouldn't be scheduled until probably after I find out what the increase is, but slightly before I see it in my paycheck, could that potentially impact the case? What if the meeting isn't scheduled until after July 11th?

Thanks!

[lrprn]

Depends on how much "slightly negative" on Schedules I minus J you actually are.

A $4500 annual increase is an extra $375/month, but you don't actually have the increase until it shows up in your paycheck. If the increase starts on June 25th, your increased paycheck won't show up until your next paycheck which may well be after your 341 meeting.

What does your lawyer say about the increase?

[PaKettle]

How much do you owe on the cash advance? It might be worth it to risk having to pay half of it back, than to screw up your whole bankruptcy by waiting. If you could push your bankruptcy up a month that sounds like it might be more secure for your bankruptcy going through... and if you end up paying back that one creditor by only making 2 payments on it instead of 3, it might be worth it... If you owe that creditor under $6000 or so it probably isn't worth it to you to wait those 3 months... just an idea...

[seanf12]

Slightly negative was around negative $-6, but that was not including a car payment I am about to undertake in the next few days (my previous car finally died)

the cash advance totaled around $6500, 1/2 taken out at the end of Feb, the other around march 5.. My lawyer advised we make a few payments on it before filing. I would expect the the third payment to be made in early May, but by using the 90 day rule, June 5th would be the earliest I could file.

The increase would be in my paycheck starting July 11th.

my lawyer recommended we don't pay it off completely as the issue of preferential payments would arise.

[Cali]

How much do you owe on the cash advance? It might be worth it to risk having to pay half of it back, than to screw up your whole bankruptcy by waiting. If you could push your bankruptcy up a month that sounds like it might be more secure for your bankruptcy going through... and if you end up paying back that one creditor by only making 2 payments on it instead of 3, it might be worth it... If you owe that creditor under $6000 or so it probably isn't worth it to you to wait those 3 months... just an idea...

So you wouldn't have to pay back the full amount of a cash advance? This is the reason I've been waiting.

[seanf12]

no, from what I understand i just need to make a few payments to show "good faith". Then I can file and include that card as part of the BK. anyone, feel free to correct me if this doesn't sound correct

[HHM]

no, from what I understand i just need to make a few payments to show "good faith". Then I can file and include that card as part of the BK. anyone, feel free to correct me if this doesn't sound correct

That is true, but given the amount involved ($6500), waiting 3 months does not put you "in the clear". It just shifts the burden of proof to the creditor. Under the circumstances, you probably want to wait at least 6 months.

Also, just to clarify an inaccuracy, the per se rule for cash advances is 70 days (not 90). The per se rule is simply that any cash advance in excess of $750 made within 70 days of filing BK is presumed fraudulent.

[seanf12]

Thanks HHM. I'll mention that to my lawyer. She (along with a couple of other lawyers I spoke with0 was the one that recommended we wait three months though, so perhaps it is something that is accepted in the local courts.

When you say burden of proof, what are they typically "trying to proove"? The cash advance was used for basic living expenses (robbing Peter to pay Paul) and not used for any major purchases of any kind. I can document this via bank statements if necessary

[seanf12]

Worst case, if it were objected to by the creditor, would that mean that that particular debt would not be discharged, but the rest would?

thanks again

[HHM]

Worst case, if it were objected to by the creditor, would that mean that that particular debt would not be discharged, but the rest would?

thanks again

Yes, that is the worse case scenario.

[SUB]

During this recommended waiting period, is it necessary to keep payments current?

[seanf12]

i was told yes, definitely want to keep current

[HHM]

During this recommended waiting period, is it necessary to keep payments current?

Yes, in order to avoid the appearance of fraud on such a recent and large charge/cash advance (i.e. taking out a loan without intent of paying it back), you need to make at least the minimum payments.

[seanf12]

so with the 90 day rule, I made a charge a couple of weeks ago for about $700 for car repairs. Is this considered a necessity and thus if I filed before the 90 days passed on this charge, it would not be considered fraudulent?

[PaKettle]

Worst case, if it were objected to by the creditor, would that mean that that particular debt would not be discharged, but the rest would?

thanks again

Yes, and also the "usual" payback - so my attorney told me - is about 1/2 of what you owe. So you would end up paying back only about $3250. And the question is, would the creditor fight it for that little profit ($3250 minus attorney fees)? My GUESS would be no.

Since this is also jeapordizing your whole Ch. 7 by waiting 3 months, and having your income go up, if it were me, I would want to consider very carefully if it is worth it. Why not just make 2 payments and then file a month early and hope for the best? I'd at least discuss this with my attorney.