25 years old and need advice on bankruptcy... please help

[ava1983]

Hi everyone,


Of course it is embarrassing, but before I can get my finances in order, I am going to need to file bankruptcy and learn the lesson the hard way. I am 25 years old and have almost $30,000 in credit card debt (it's the only debt I have). I used to be able to pay off the minimum every month, but now that I'm a full-time student, I see no other way out than bankruptcy.

Do you all think I should open a new checking account at a different bank before I do so? If so, a national bank or a local credit union? All my credit card debts are through my current bank, and I'm afraid that they may cancel my checking account if I file.

Also, should I be answering all the phone calls I get? I am so scared. I still have about $500 left for cash advance on a card through my bank that I want to use on obligatory bills (rent, utilities, etc.) before I file, but I'm afraid that since the bank is already calling me every day, that something about that is fraudulent, even though it is my personal line of credit.


Please help - should I open a new checking acct. before I do this?!

Thanks everyone.

[AngelinaCatHub]

Hi everyone,

First of all, welcome to help and you are with a friendly community.

Of course it is embarrassing, but before I can get my finances in order, I am going to need to file bankruptcy and learn the lesson the hard way. I am 25 years old and have almost $30,000 in credit card debt (it's the only debt I have). I used to be able to pay off the minimum every month, but now that I'm a full-time student, I see no other way out than bankruptcy. Forget the embarrassing crap. We've all been there. Get over that. Well poor planning as a full time student. What did you do for income before?

Do you all think I should open a new checking account at a different bank before I do so? If so, a national bank or a local credit union? All my credit card debts are through my current bank, and I'm afraid that they may cancel my checking account if I file. NO! NOT AT ALL. That does look like an attempt to hide funds.

Also, should I be answering all the phone calls I get? I am so scared. I still have about $500 left for cash advance on a card through my bank that I want to use on obligatory bills (rent, utilities, etc.) before I file, but I'm afraid that since the bank is already calling me every day, that something about that is fraudulent, even though it is my personal line of credit. If I understand, you have NOT taken this? If so, do NOT take it. THAT IS fraud. Yes, answer and state that you are working on a plan and do not call again. If you do not, they may call your friends, relatives, etc. DO NOT talk too much. You can accidentally reaffirm a debt with your mouth.


Please help - should I open a new checking acct. before I do this?! NO!

Thanks everyone.

That being said, we need more info. Draw down your account to a bare minimum. Order the C7 book from Nolo Press for about 17 bucks. A good buy. Educate yourself and you must understand, you WILL have to change your purchasing habits.

If you take any cash advance you are toast. 'Hub

[ava1983]

Thank you for your reply and kind words - I am now even more scared however! I hope you respond again.

One of my credit lines is cash advance only, really. So yes, I have taken a recent cash advance. Why will this make me toast, since I haven't filed anything yet?? I just haven't paid my credit card bills. Also curious how it would be fraudulent if I am allowed to take cash advances (transfers into my checking) through its loan agreement? Did I do something illegal? I obviously really need to know.

Regarding opening up a new account, I have no intention of hiding any funds - I'm just afraid that once I file Chap. 7, my checking account will be closed and I won't be able to open another one. So I was thinking I should do it beforehand - before they see I am high-risk.

Yes, my spending habits will have to change. DRASTICALLY. I am well aware and actually looking forward to going through the mandatory classes, as I can't ever let this happen again.


Big question is, did I do anything illegal by essentially maxing out my credit cards and almost maxing out my "reserve line"? (the one that I've been given cash advances on)


Getting a headache now...

[DeadManCrawling]

I am afraid I must disagree, strongly, with Hub on one point.

If you are about to default on payments, and your credit cards ARE through your current bank, you MUST open another account immediately, with a bank you do not currently do business with.

Run a search on this site for the following terms: cross-collateralization or the right of set off.

If you default-stop paying-on credit cards, the bank almost certainly has the right to clean out your other accounts, like checking and saving, to pay themselves. They can also overdraft these accounts in the process, thereby paying themselves more and attempting to rack up fees. All the fees are discharged in BK, but they will have all of your other money from checking and savings.

Not pretty.

I certainly would not put money into those accounts or deposit checks or continue auto-deposits.

I cannot comment on anything else, really, but welcome and good luck.

[AngelinaCatHub]

Thank you for your reply and kind words - I am now even more scared however! I hope you respond again. I'm here.

One of my credit lines is cash advance only, really. So yes, I have taken a recent cash advance. Why will this make me toast, since I haven't filed anything yet?? NO, it will not. Only in timing and intent. You KNOW you are going to file, so the fraud only occurs when you file and you know you do not intend on paying this back. It equates to theft. I just haven't paid my credit card bills. Also curious how it would be fraudulent if I am allowed to take cash advances (transfers into my checking) through its loan agreement? Did I do something illegal? I obviously really need to know. No you did not do anything illegal (see above). Until you file, you can do anything you wish. About what DMC stated, I was wrong not realizing it was the same bank that you had the credit line. Perhaps I did not read it well. (I've been pretty occupied today.)

Regarding opening up a new account, I have no intention of hiding any funds - I'm just afraid that once I file Chap. 7, my checking account will be closed and I won't be able to open another one. So I was thinking I should do it beforehand - before they see I am high-risk. I concede and stand corrected. Thanks DMC.

Yes, my spending habits will have to change. DRASTICALLY. I am well aware and actually looking forward to going through the mandatory classes, as I can't ever let this happen again. WELLLL, you are on your way to healing and I applaud. We in 2000, where worth ten mil in land and assets. We understand a new life style. Matter of fact, we are much happier poor than when we didn't need to account for junk purchases. Values mean something.


Big question is, did I do anything illegal by essentially maxing out my credit cards and almost maxing out my "reserve line"? (the one that I've been given cash advances on) No you did not. It is the intent that makes bk fraudulent. You are in a learning curve now and you have not filed. This is a FEDERAL Court so they are hard to fool. They are kind for sure until they sniff out any irregularity. You are fine.


Getting a headache now... Please, have a hot bath, a red wine, and the understanding that you now have 'friends' who wish nothing but the best for you.

'Hub

[ava1983]

Thanks so much to both of you ~ so so much ~ this forum may become my lifeline, and is already helping the pretty intense physical headache I developed tonight from these thoughts. Just want to make sure I'm not a criminal and I'll be able to sleep tonight. I'm scared that even if a "delinquency" on my credit report doesn't make me one, that a "fraudulent account" message from my bank on my cell phone means I am. ?? I'm scared to call them back - "Oh hello, sorry about the unpaid credit card bills.. I will be filing bankruptcy soon, please don't take me to jail!"

Overreaction, right?!


Regarding the $500 or so that I could take out before I go down the bankruptcy path, do you guys recommend that I DO take the $500 out? If I take it out in cash, I can set that aside to make sure I have enough for when I have to pay a bankruptcy lawyer.

And if I do take it, how long will I have to wait before I file bankruptcy? I know there is a cash advance rule.


Ok, I am still trying to calm down now. .. thanks for everyone's responses. This girl needs it. ;)

[mtbc]

My unresearched impression is that credit that you used after the point when you thought you wouldn't be able to pay it back can be viewed as fraud. It's certainly distinctly frowned upon. That's why it's important to try to get a couple of minimum payments in after charging stuff, so it at least looks like you might have felt you were still cashflow-solvent at around that time even if you had negative net worth.

What I don't know is, if it looks like you borrowed past the point you thought you might pay it back (e.g., borrowing a bunch right before filing, without a big change of circumstances in between), if that just means that you can't discharge that bit of recent extra debt, or if it jeopardizes your whole case. The latter may be possible if it looks like intentional abuse of the system.

Absolutely, open checking at a completely unrelated bank.

You may want to take a few months to try to sort a bunch of this out and get it behind you. You can write to creditors and, with potent legal force, demand that they stop calling you. Before you file bankruptcy, though, they can still try to collect -- get a judgment against you, seize valuable assets, garnish wages, whatever -- but that often takes time and, if you are fairly collection-proof, then maybe you can leave your creditors behind long enough to at least show some track record of trying to pay, before you file?

It may be well worth consulting a few lawyers. There are various payment plans available and suchlike, you may even find a way to afford to use one for your case. You don't want to be flagged, by creditor complaints or otherwise, as having acted in bad faith. I am not a lawyer -- the above is just my impression of how things are and, beyond, "talk to a lawyer", is certainly not legal advice.

[ava1983]

So sorry.. one more thing. Bank of America already offered me a free checking account, but I've heard bad things about them - should I go with them or put my money in a local bank/ credit union that charges a small monthly fee?

[ava1983]

"Before you file bankruptcy, though, they can still try to collect -- get a judgment against you, seize valuable assets, garnish wages, whatever -- but that often takes time and, if you are fairly collection-proof, then maybe you can leave your creditors behind long enough to at least show some track record of trying to pay, before you file?"

I own no property, and my car is only worth about $1,000. What else could they seize as valuable assets? Will they go through my bedroom looking for stuff they can sell? (obviously I am so new to this...)

And garnish wages!!??? My wages are the only finances I have to pay rent, etc. I make less than $1,000/mo. Could they really take my wages?

I feel like a few months might be too long to wait because of this. No?

Thanks for your reply ~ I will take these things into consideration.

[mtbc]

These things typically take time to happen (I've laughed at very many months of "scary" letters), and when they get too scary my impression is that filing stops them anyway, and, depending on what state you're in, there are typically various factors (exemptions and the like) that stop them taking anything that isn't very juicy. It's important to know your rights against collection efforts, but that varies by location -- there's another category in this forum all about collections that might be interesting for you to browse through.

I don't know enough about your situation to really say if it is a good idea to wait a while, and that's really a decision only you or your lawyer can figure out -- but at least know that it may be an option, especially if it gives you time to try to patch up anything that might look bad right before filing.

[ava1983]

'Hubb,

When you say "Yes, answer and state that you are working on a plan and do not call again. If you do not, they may call your friends, relatives, etc. DO NOT talk too much. You can accidentally reaffirm a debt with your mouth." .. what exactly should I be careful NOT to say to them? Talking about my bank here, too...


I know I am full of questions.. thanks guys - I'll give this forum a break now and just check it before bed. Off to homework..

[mtbc]

an irrelevant aside

I suppose I should add: As well as my not being a lawyer, while I can point out possible options, I can't advise you well from personal experience here, because I'm risk-averse enough that I would typically skip town very effectively instead whenever it seemed wise -- change state, and start out making it very hard to find me in that state, so, from a first-hand point of view, I stayed well enough ahead of collectors for it never to be a problem. It's really wanting to settle down a bit, especially since my son has been in four schools in three different states in the past four years, that helped to prompt me to try using bankruptcy to resolve a lot of these issues instead. I didn't even get a driver license for my present state (MA), nor have any mail even from the bank coming to an address in my state, until shortly before filing. So I never had to face down collectors who'd gotten far in their process, I've mostly just read reports here and elsewhere from others who have.

[AngelinaCatHub]

"Before you file bankruptcy, though, they can still try to collect -- get a judgment against you, seize valuable assets, garnish wages, whatever -- but that often takes time and, if you are fairly collection-proof, then maybe you can leave your creditors behind long enough to at least show some track record of trying to pay, before you file?"

I own no property, and my car is only worth about $1,000. What else could they seize as valuable assets? Will they go through my bedroom looking for stuff they can sell? (obviously I am so new to this...)

And garnish wages!!??? My wages are the only finances I have to pay rent, etc. I make less than $1,000/mo. Could they really take my wages?

I feel like a few months might be too long to wait because of this. No?

Thanks for your reply ~ I will take these things into consideration.

MTBC is right on. Now, from the top, they can sue you, yes. You are not Judgment proof but may be collection proof. In a bk 7 (with a bit more effort) you can get that judgment discharged.

Second in the event you own no property, this is good in the fact that what you do not have, they cannot take. Your car cannot be levied on, it is exempt, your wages are protected up to $500 a week as head of household (check local state laws), and it looks as if you are certainly in good shape for a successful and easy bk.

IMHO I sincerely hope you reconsider taking your credit line of $500. This is the only thing I can imagine in what you have told us, that could trip you up. Yes, it is not much, but your intent is that you wish to take this advance with knowledge that you can't pay it back. It would be better to get a gift of it from family. Pay it back after your discharge.

Why put a stressful worry in front of you when you will and are already stressed and worried???

OK, after you get the 500 bucks, what to do next month? No, you have to start your "New Start" now. Practice as if you only had cash or you cannot buy. That is your best bet, otherwise, when discharged, the circle will return and you will have NO OUT.

Again, you are amounge those who either have been there, are there, or are getting educated and learned correct advice.

You will be fine. Go get that hot bubble bath, red wine and a good nights sleep. GBWY. 'Hub

[AngelinaCatHub]

'Hubb,

When you say "Yes, answer and state that you are working on a plan and do not call again. If you do not, they may call your friends, relatives, etc. DO NOT talk too much. You can accidentally reaffirm a debt with your mouth." .. what exactly should I be careful NOT to say to them? Talking about my bank here, too...


I know I am full of questions.. thanks guys - I'll give this forum a break now and just check it before bed. Off to homework..

Oh, this one slipped in before my last post.

Here is what I mean about answering creditors questions. They will ask, "when can we expect your money?" They are recording all the time. Be very polite, but non informative. Do not say things like "Yes-I agree-OK-I will, etc." These things can be put into tape so to speak to make your voice appear as if you agree on some amount or even a bogus debt. Is this really done? LOLOL, yes it is.

About being apologetic for questions, we are here to service question and we do this freely from our heart and our experience. 'Hub

[Flamingo]

Ava - after quickly reading these postings, stop using all credit cards, do not take any cash advances and take the time to get a few free consultations with BK attorneys in your area. Since you are a student and I don't see any mention of any income, how you are living (do you live with your parents?) and other things that are important to form an opinion, while filing bankruptcy to get rid of your heavy debt load seems unavoidable, BK will not solve any cash flow problems you have and there is a lot you need to go over with legal counsel, especially since you are not disclosing your entire situation here. Put together a complete listing of all your debts, monthly payments, sources of income, recent paystubs and a listing of your assets and make a few appointments. If you are living with your parents, all that information will also need to be disclosed.

Best of luck to you - it will all get resolved and be a thing of the past but you need to know that it will not solve your cash flow problems and/or lack of a job/incoming money while you are a student so there are many things you have to consider.