Balance Transfers

[debter08]

My husband and I are 50K in debt. We have a 4 year old and another on the way. My hubby only makes like 50K a year working 2 jobs. I am a nursing student. We are seriously considering BK. We are current and have never missed a payment. My hubbys score is in the 800's. We just transferred a whole bunch of credit cards onto 0% interest cards. By reading articles on the internet I am freaking out because alot of them say you can't have these discharged because it looks like a major purchase. We did this as an attempt to make our situation better to pay off the debt. Is this going to make us look like we are committing fraud?

[Help!]

We did the same back in December, then filed in April. At our 341 hearing, we were asked if we made any major purchases on our credit cards in the previous 90 days for luxury items. The balance transfers were never an issue and I think the only way they would be is if the individual creditor objected to discharge or the UST attempted to dismiss on the basis of fraud. If you're below the median income, I think you'd be below the radar of the UST anyway.

We did have bank account records that would show very large credit card payments the month the balance transfer checks were deposited, so I don't think it would have been an issue in our case. If I were you (based on what you've said about your situation), I'd let some time pass before filing (ideally 6 months). It is my opinion that it makes no sense for your hubby to be running himself into the ground working two jobs during this time, only to have that income counted against you when you file. The problem with the means test is that working hard to stay afloat before filing puts you at a disadvantage. Our scores were in the 800's also, never late on a payment, and we did everything we could to keep up with those payments (including emptying our 401Ks, cashing in savings, stock, etc.). Unfortunately, all of that is being counted against us as income even though all of it was paid to our creditors. We would have been better off letting the bills go unpaid, then filing.

Our biggest mistake was rushing to file Ch. 7 out of panic when we were only a month behind on a few payments. We should have talked to several attorneys for advice and timed our filing better. Filing Ch. 7 decimated our credit anyway, so five or six months of late payments wouldn't have mattered.

[morallyBR2]

Just wait a few months, all will be fine.

[debter08]

Thanks for your response!! It's nice to know someone else was in the same situation. I don't know how we got ourselves into this mess. Before we had kids we were debt free and good. Now we are just a financial mess. Even with my hubby's two jobs we make under the median(that was for last year and I was working part-time). We are really upset to have our perfect credit ruined but we feel we will never move forward in our lives when all of our hard work goes to debt payments.

[diviaruba]

How much is "a bunch" of old debt onto zero interest cards? As far as the new card issuers are concerned, that is new debt to them. It is a cash advance, and not a purchase, and subject to a presumption of non-dischargeability if over $750 and within 70 days of filing. They would certainly consider it objectionable if you filed in that time frame.

Bigger amounts mean longer time between the charges and the filing to avoid the challenge - even if outside of the statutory presumption period. You should also be making the minimum payments on the debt for as long as possible.

While you may see it only as exchanging one debt for another, the card issuer will see it as the one left holding the bag when the music stopped. As you may well imagine, they don't like that, and will fight it if the amount is large enough.

[Help!]

Thanks for your response!! It's nice to know someone else was in the same situation. I don't know how we got ourselves into this mess. Before we had kids we were debt free and good. Now we are just a financial mess. Even with my hubby's two jobs we make under the median(that was for last year and I was working part-time). We are really upset to have our perfect credit ruined but we feel we will never move forward in our lives when all of our hard work goes to debt payments.

It's the kids.

Kidding. We were okay until the third baby's very expensive delivery and NICU bill. 20% copay doesn't sound too bad, unless it's 20% of $100,000! Our biggest mistake was not facing our debt right away. We just kept shifting debt around while being about $1000K short each month on our unrealistic budget. Our home equity bailed us out after about 3 years of that routine, but then we also had to pay on the HELOC. The best thing we could have done was to file BK when we reached about $30K in CC debt. We kept crossing our fingers for the next bonus, the next raise, etc. and didn't want to have to admit failure. A little older and wiser, we now know it has nothing to do with success or failure. It's a business decision for us and for the future of our kids, so there's nothing left to do but git 'r dun!

You're wise to address your debt now, because BK is a miserable thing to go through when the kids are old enough to be affected by it. We're talking to our kids about money ALOT throughout this process, explaining to them what happens when you borrow money from the bank to buy your house, your car, your groceries, your clothes... trying to explain to them that someone who drives a 1989 Ford Taurus may actually be "rich" while the guy next to them driving a 2008 BMW may actually be "poor".

I'm rambling. Could be because I haven't slept since our second 341 hearing yesterday. Anyway, hang in there and get a good lawyer!

[SJM]

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[SJM]

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[AngelinaCatHub]

I’m with ‘Diviaruba’ and in my opinion, wait as long as you can stand it and pay the minimums. It kinda looks like you eliminated several possible suits to stick it on one entity to avoid a lot of law suits. It could be misconstrued as some sort of game playing. I’m pleased you moved it all to interest zero account but the timing may hurt you if you 7 too soon. ‘Hub

[danaf]

Try to wait it out as long as you can, like 6 mos to a year. Definately over 4 months. You didn't say the amount. Make the min. payments for as long as you can.

[PaKettle]

I concur with others. Pay as many minimum payments as you can and then file in about 6 months after that. DO NOT take out any more loans or use your cards for big purchases. If you can't make minimum payments then make partial payments, pay something.

After 6 months it would be hard for them to cry "fraud"!

IF you get desperate and cannot wait for 6 months, talk to an attorney. Depending on how much your balance transfer was and what bank it is, and what kind of circumstances are leading up to filing, an attorney may advise you that you can file before 6 months ...

[Phillymanhere]

Debt08,

You say that you and your husband were current on your bills and that your hubby had a credit rating of near 800. I'll offer a different perspective, and I say this as someone who was also current on my cc debts and who also had a high credit score (though not 800).

I now view my high credit score as artificial, inflated and wholly misleading. The reality of the matter is that I could not afford, did not deserve and should not have received one additional penny of credit for the at least a year or so before I decided to file for bk. The only reason I kept current on payments was because I was running up further debt! ... I was using one card to make payments on another.

I do not intend to be negative. It's just that a lot of us who are near bankruptcy somehow focus on having been current on payments and having a high score--as if that indicates that OTHERWISE WE WERE IN WONDERFUL FINANCIAL SHAPE, otherwise we have our financial act together.

As the young people say, "NOT!"

A high credit score means something only if in fact I can handle additional credit. The fact that I kept telling myself that I was a good credit risk (as evidenced by my FICO scores) was simply part of some grand illusion in which I had immersed myself. My high score was evidence only of the fact that credit report agencies can be staggeringly incompetent.

[epiphany]

The reality of the matter is that I could not afford, did not deserve and should not have received one additional penny of credit for the at least a year or so before I decided to file for bk. The only reason I kept current on payments was because I was running up further debt! ... I was using one card to make payments on another.

This is exactly what happened to me, or rather, what I made happen. I don't think I was in denial, but I think I went to all costs to ignore what would eventually come to a head. Like you, I couldn't give less of a crap about my credit rating right now. It is what it is until it isn't. I need to get filed and discharged before I can even think about that, and even then, I think the only thing I may ever want to clean it up for is to buy a car when the time comes that I need a new one. I am driving a 96 Toyota right now (at least it gets great gas mileage) and will hopefully it will last a few more years.

To the OP--if you are current on your payments, and you transferred to zero balance cards, I don't think that looks like fraud. The way I see it, why would anyone even bother to do that if they were going to stop paying? It just looks like you were trying to reduce your payments so that you could continue paying.

However, that is how it looks to ME and I don't count. You you really need to discuss your situation with a lawyer.

Best of luck to you.

ep

[Cali]

I also agree with Diva on this. I would suggest waiting 6 or more months before filing.

[Help!]

How old do you think kids are when they begin to be affected by it? Mine are 6 & 7 right now and we do not plan to file right away.

Thanks.

Depends on the kids, I guess. I didn't realize they were listening to some of our conversations until our 10 year old asked if they were going to take away all of our Christmas presents this year. Very sad - that's when the magnitude of all of our mistakes hit me all at once.