When Should I file and should I file 7 or 13?

[killwind]

My husband and I both have secured jobs, earning $65K and $80K respectively. However, due to financial fraud committed against us, current huge mortgage payment and bad real estate investments (3 rentals are in the process of being foreclosed due to inability to sell and all are upside down) we have drained our savings and are living on 11 different credit cards. 2 of the CCs we have had since 2003 and the remainder were opened either on 6/07 or 1/08. We have NOT missed one payment but we are at the point that we are not able to afford to continue to make the minimum payments.

We want to file Chap. 7 one year from now. The plan is to stop incurring debt one year prior to filing.

1. Can we IMMEDIATELY stop making payments on the majority of the cards and only pay 2 of the CCs since we recently did a balance transfer and made huge purchases during the month of May 08? Prior to this, no transaction had occurred although the cards had been opened since 1/08. We don't want the trustee to think we have no intention to pay. How is this view by the trustee if we only pay for the above 2 CCs (and not the remaining 9 CCs) until the end of the year and then cease payments or should we even pay that long?

2. My husband took a $50K loan from his 401K in 1/08 and we were only able to afford to make one payment. We then got a 1099. How will this be view by the trustee?

3. We both currently make contributions towards our 401Ks. How will the trustee view this?

4. We also own half of a $350K universal life insurance policy on my mother and pay $547 per month (she pays the other half). What happens with this?

5. Please review this article written by CA BK attorney Michael Doan and tell me what you think b/c it fits our profile in every way.

http://www.************************/...your-mortgage/

Any honest advice, comments, suggestions good or bad will be greatly appreciated.

[killwind]

P.S.

We do pass the CA means tests and meet the requirements for Chap. 7 and 13 based on a brief consultation with BK attorney 1 year ago and based on our research via the internet.

[JRScott]

My husband and I both have secured jobs, earning $65K and $80K respectively. However, due to financial fraud committed against us, current huge mortgage payment and bad real estate investments (3 rentals are in the process of being foreclosed due to inability to sell and all are upside down) we have drained our savings and are living on 11 different credit cards. 2 of the CCs we have had since 2003 and the remainder were opened either on 6/07 or 1/08. We have NOT missed one payment but we are at the point that we are not able to afford to continue to make the minimum payments.

We want to file Chap. 7 one year from now. The plan is to stop incurring debt one year prior to filing.

1. Can we IMMEDIATELY stop making payments on the majority of the cards and only pay 2 of the CCs since we recently did a balance transfer and made huge purchases during the month of May 08? Prior to this, no transaction had occurred although the cards had been opened since 1/08. We don't want the trustee to think we have no intention to pay. How is this view by the trustee if we only pay for the above 2 CCs (and not the remaining 9 CCs) until the end of the year and then cease payments or should we even pay that long?

2. My husband took a $50K loan from his 401K in 1/08 and we were only able to afford to make one payment. We then got a 1099. How will this be view by the trustee?

3. We both currently make contributions towards our 401Ks. How will the trustee view this?

4. We also own half of a $350K universal life insurance policy on my mother and pay $547 per month (she pays the other half). What happens with this?

5. Please review this article written by CA BK attorney Michael Doan and tell me what you think b/c it fits our profile in every way.

http://www.************************/...your-mortgage/

Any honest advice, comments, suggestions good or bad will be greatly appreciated.

1. Bad plan. If you pay just 2 of them the others will be pulling your credit report and see that. This will hasten how quickly they seek remedy for the situation. Pay none of them. (Be sure to pay secured debt though).

2. It will count as income. So make sure that is not on the 6 month look back for income for the means test. In addition he may want to know what it was spent on so round up any receipts. (Don't volunteer the information be prepared though).

3. Usually 401k contributions are considered reasonable so long as they are not excessive.

4. You will have to report it. I'm not sure this would be considered a reasonable expense. Also if your mother was to die, then the insurance money would become part of the bk estate if it hasn't been more than 180 days since discharge.

5. I'm not familiar enough with this area of the law to espouse an opinion. If you want my gut feeling, if it sounds to good to be true, its too good to be true. There are programs out there that can get you out of debt but they are not easy and depending on situation or circumstance you may not be able to do them, one is operated by Dave Ramsey and you can go to daveramsey.com to look at his advice. (However I"m gonna warn you his plan includes working more, cutting corners on food, entertainment, vacations, etc until you are out of debt.)

[JRScott]

P.S.

We do pass the CA means tests and meet the requirements for Chap. 7 and 13 based on a brief consultation with BK attorney 1 year ago and based on our research via the internet.

Are you sure?

145k income is high. How many dependents in your household?

If you are above the median income expect a fight in most cases even if the means test says you qualify after filling everything out, a lot of UST challenge all over the median income filers petitions, though a good number of folks still successfully get a discharge.

[laurannm]

I always thought you should at least make a few payments on a card that you recently used (particularly for large purchases and transfers), in order to show good faith and lessen the probability of a creditor objection down the road.

[momof5]

How have you received a 1099 for your 401k loan already? Did you mean 1/07 as the date?

Also For California, cases filed after February 1, 2008, the median income for a single wage earner is $46,814; for a family of two, it is $61,742; for three, $66,611; and for four, $76,931. Add $6,900 for each individual in excess of 4.



As far as living on credit cards.That seems to be a common practice shortly before finding the need to for bankruptcy relief. No matter what the income.

[JRScott]

I always thought you should at least make a few payments on a card that you recently used (particularly for large purchases and transfers), in order to show good faith and lessen the probability of a creditor objection down the road.

It is better to pay on them, but as I said the other credit cards may move more quickly against you if they see you paying some and not them. Given their financial situation it might be better not to pay them but they should ask a lawyer.

[killwind]

Are you sure?

145k income is high. How many dependents in your household?

If you are above the median income expect a fight in most cases even if the means test says you qualify after filling everything out, a lot of UST challenge all over the median income filers petitions, though a good number of folks still successfully get a discharge.

We live in CA with a household of 6. With $50K adding to our income due to the loan default, this increase our income to almost $200K. I will redo the means test.

What is UST?

[killwind]

We live in CA with a household of 6. With $50K adding to our income due to the loan default, this increase our income to almost $200K. I will redo the means test.

What is UST?

TYPO: I meant to say, household of 7, we have 3 children and the other two are my mother and adult brother.

[killwind]

How have you received a 1099 for your 401k loan already? Did you mean 1/07 as the date?

Also For California, cases filed after February 1, 2008, the median income for a single wage earner is $46,814; for a family of two, it is $61,742; for three, $66,611; and for four, $76,931. Add $6,900 for each individual in excess of 4.



As far as living on credit cards.That seems to be a common practice shortly before finding the need to for bankruptcy relief. No matter what the income.

I meant to say we will be receiving a 1099 for our 401K loan.

We are a household of 7. Two are my mother and adult brother (mentally challenged). Will they be counted as members of my household?

[killwind]

[QUOTE=JRScott;169391]1. Bad plan. If you pay just 2 of them the others will be pulling your credit report and see that. This will hasten how quickly they seek remedy for the situation. Pay none of them. (Be sure to pay secured debt though).

Hi, JR scott, thanks for your responses to all my questions. I really appreciated.
Let's say I stop payment on all of my credit cards effective 7/08, would it be really easy for the creditors to object (citing fraudulent intent) to the 2 recent cards since no payment have yet been made?

Also, I read on other threads in which a person mentioned to continue to send in something, even though it is significantly less than the minimum payment, to show we made attempts/efforts to be consistent with our payments before actually filing. Since I no longer can't keep up with all of the 11 CCs minimum payments (which totals up to $3000 per month), I was thinking about sending in $100 to each CC at least until the end of the year.

Very stressed about this issue right now b/c we do not want to file at least 9-12 months from now and it would be completely embarrassing if the credit card companies attempts to garnish our wages in the interim.

[JRScott]

UST = United States Trustee. They get involved in almost all above medium/high debt petitions.

As for your mom and aunt, so long as they live in your house and you cover more than half of their living expenses (home, travel etc) then for bk they count as your household.
(A household of 7 would be 97631 in CA for median income)

If you've made absolutely no payments on those 2 then yes I'd try to send something to them for two months if you can maybe three.

There is a way to send something to everyone. There is a plan where you take and pay all the essentials first. Then you take whatever is left over and divide it evenly among all the remaining creditors. Send that amount to each of them. Also send a paper detailing your budget, and how much you paid each creditor that got this part of the distribution. It won't stop the calls but it will show you tried something.

I would start looking for jobs immediately. You might could still save yourself from bankruptcy, which is not something many folks can do.