Trying to Save a CC

[backtoschool]

Most of you are kinder about Credit Counseling than I am. My personal take on it is:

1. It damages your credit rating to go through one of those outfits you make a monthly payment to for however many years, some say it damages it as much as BK.
2. Even if you are talking about credit counseling where you are doing a "do it yourself" on payments, 99% of the time, by the time you are there you are not realistically going to get out of debt without some type of bankruptcy.

My attorney gave this as a guide, and it makes perfect sense to me:

"If you cannot reasonably get yourself out of debt in the next five years you need to seriously consider bankruptcy. "Reasonably" meaning that if eliminating the luxuries of life (vacations, expensive clothes, most restaurant meals, cable TV) will not leave you with enough money to pay off debt and build three months salary in savings for emergency. If you work in accounting or banking or a position that requires a security clearance and do not have an alternative career plan, you will likely want to get one prior to filing or not file, period. With that exception, frankly, 95% of people in this situation should file."

You could argue that as a BK lawyer, he is biased to BK however it makes absolute sense to me. Postponing the inevitable with "credit counseling" also delays your ability to save and plan for the future.

I am sure someone somewhere did well with it, I just have not met that person.

I agree with you Leena. Credit counseling rarely works. Lowering the interest rates on cards when you have $100k of credit card debt is not going to offer you a fresh start. There is no "fresh start" with credit counseling either, since you still have all the debt on your reports and are still liable for all of it. Also, a creditor can refuse to participate in a credit counseling plan and can opt out of it later if they so choose. You have no legal rights to continue a credit counseling plan the way you would have legal rights in a chapter 13 which would give you the same results as a credit counseling payoff plan.

[backtoschool]

I had a similar situation with a dentist and thought I was going to have to continue payments to get the work done. Lawyer said I had to include him but who I paid POST discharge was no one's business but my own. I explained to the dentist and he was fine with it (some dentists are eager to work with you these days since their own incomes are done from many people delaying non-essential work). However, I got lucky and when my then-fiance found out about the whole thing (I was trying to just handle it myself) he insisted on paying for all the work.
I think you should be okay, because if nothing else you can show medical need as a reason for the "preference". Trustees are pretty understanding on that usually, I think.

I think that paying medical bills post discharge is ok. (if you want to maintain a relationship with your doctor or dentist and want to keep that debt for some reason instead of going to a new medical professional to get the work done) LaurieM was talking about post filing which is a very different animal from post discharge/closing. You should not pay the medical bills post filing as the trustee might claw the payments back and you are just throwing money away. Post discharge, well that is up to you.

[tobee43]

Most of you are kinder about Credit Counseling than I am. My personal take on it is:

1. It damages your credit rating to go through one of those outfits you make a monthly payment to for however many years, some say it damages it as much as BK.
2. Even if you are talking about credit counseling where you are doing a "do it yourself" on payments, 99% of the time, by the time you are there you are not realistically going to get out of debt without some type of bankruptcy.

My attorney gave this as a guide, and it makes perfect sense to me:

"If you cannot reasonably get yourself out of debt in the next five years you need to seriously consider bankruptcy. "Reasonably" meaning that if eliminating the luxuries of life (vacations, expensive clothes, most restaurant meals, cable TV) will not leave you with enough money to pay off debt and build three months salary in savings for emergency. If you work in accounting or banking or a position that requires a security clearance and do not have an alternative career plan, you will likely want to get one prior to filing or not file, period. With that exception, frankly, 95% of people in this situation should file."

You could argue that as a BK lawyer, he is biased to BK however it makes absolute sense to me. Postponing the inevitable with "credit counseling" also delays your ability to save and plan for the future.

I am sure someone somewhere did well with it, I just have not met that person.

actually leena...i don't know a single person that fared well...NOT A ONE mind you!!! actually most everyone i know it made their situation much worse.

[leena]

Most of you are kinder about Credit Counseling than I am. My personal take on it is:

1. It damages your credit rating to go through one of those outfits you make a monthly payment to for however many years, some say it damages it as much as BK.
2. Even if you are talking about credit counseling where you are doing a "do it yourself" on payments, 99% of the time, by the time you are there you are not realistically going to get out of debt without some type of bankruptcy.

My attorney gave this as a guide, and it makes perfect sense to me:

"If you cannot reasonably get yourself out of debt in the next five years you need to seriously consider bankruptcy. "Reasonably" meaning that if eliminating the luxuries of life (vacations, expensive clothes, most restaurant meals, cable TV) will not leave you with enough money to pay off debt and build three months salary in savings for emergency. If you work in accounting or banking or a position that requires a security clearance and do not have an alternative career plan, you will likely want to get one prior to filing or not file, period. With that exception, frankly, 95% of people in this situation should file."

You could argue that as a BK lawyer, he is biased to BK however it makes absolute sense to me. Postponing the inevitable with "credit counseling" also delays your ability to save and plan for the future.

I am sure someone somewhere did well with it, I just have not met that person.

[tobee43]

I was told it was okay to continue paying medical bills. I have dental bills (only owe approx 1000) but will continue work. Now I'm only paying them 100 a month, but if I don't, the work will stop....I have seen the dentist twice since retaining my lawyer. I have explained to the dentist I will be listing him on the bankruptcy since I have to, but I will continue to pay.

Was this the wrong advice? If I don't get the continuing work, I may be spitting teeth at the trustee when the 341 comes! Nah, its not that bad, but it is necessary.

i was right in the middle of extensive medical work while during my filing....the amount of my doctor was included in my sch j...and on my means test and it was a necessity....or i would have died. so with us, it was no choice and by the way NO problem. while you cannot show preferential payments to creditors, it will depend on how your atty handles this. the court is usually looking more for hiding of monies or giving to family members to snatch and hide.

we also submitted documentation backing up my medical condition. so it was not treated like a cc payment. but that is what was needed to do.

i think this issue is more scrutinized when it's a "PAST" due bill...then something one is doing for their health presently.

a good example really is me....we had over 200k worth of medical bills we listed on our bk petition...but i never named the doctors that i still had to see and i was still awaiting two separate surgeries at the time of my 341. and again, we were never behind on any payments and now our insurance was picking up on the remainder balances..... in other words...i didn't name them because i wasn't behind on any payments.

it sounds sticky...but i think it will be ok. doctors ARE NOT CC's!!!! i know it's confusing.

[leena]

I had a similar situation with a dentist and thought I was going to have to continue payments to get the work done. Lawyer said I had to include him but who I paid POST discharge was no one's business but my own. I explained to the dentist and he was fine with it (some dentists are eager to work with you these days since their own incomes are done from many people delaying non-essential work). However, I got lucky and when my then-fiance found out about the whole thing (I was trying to just handle it myself) he insisted on paying for all the work.
I think you should be okay, because if nothing else you can show medical need as a reason for the "preference". Trustees are pretty understanding on that usually, I think.

[Panacea]

I was told it was okay to continue paying medical bills. I have dental bills (only owe approx 1000) but will continue work. Now I'm only paying them 100 a month, but if I don't, the work will stop....I have seen the dentist twice since retaining my lawyer. I have explained to the dentist I will be listing him on the bankruptcy since I have to, but I will continue to pay.

Was this the wrong advice? If I don't get the continuing work, I may be spitting teeth at the trustee when the 341 comes! Nah, its not that bad, but it is necessary.

[tobee43]

Not to worry... this will be my last visit to this site. I happened upon the site by accident looking for something totally different that what this ended up being anyway... thought I'd offer up some of what I have learned in the work that I do... clearly it's not appreciated.

laurie, i'm not saying you are unappreciated. however, may i suggest that perhaps you post wonderful informative threads in the "rebuilding your credit" part of the forum. i am not implying that some of your answers in other threads have not been helpful to some.

i'm certain many would greatly appreciate some suggestions and guidance with your expertise in your field. as well, much of your input would and could help many in understanding money management skills and assistance you could provide to those that really need some help in that area. it's what you do best, i'm certain!

[tobee43]

I agree Tobee43 that LaurieM meant well, but she was not looking at the whole picture. No trustee is going to allow a filer to throw money at a preferred creditor and then claim insolvency. It is not fair to the other creditors and it would be seen as an abuse of the system. Best case scenario, the money would be recovered from the creditor by the trustee (and that would certainly cause the creditor to close the account). Worst case scenario, the case could get dismissed for bad faith.

Being a credit counselor does not really matter to what happens once you file bk. Credit counseling and dealing with a trustee, and the US trustee are two very different things. Drawing attention to oneself by putting up red flags for the trustee, and trying to game the system are not good plans if you want to have a successful chapter 7.

not only an excellent point...but...let us not forget that many us wasted our time and money on credit counseling that only delayed the inevitable...not forgetting they made a ton of money from those that participated on top of it all.

i'm not suggesting all credit counseling is bad...actually there are many i'm certain on this forum that have learned better money management skills from real money management counseling...or by the true reality of being hit so hard they had to file bk.

i'm so in agreement with you b2s.

[leena]

It's probably a waste of money Oscar. I had two credit cards with very small balances, maybe 70.00 that I paid before filing, thinking they may not be closed. Guess what.. They said thanks for the payment but due to the filing we're closing your account. I also had a number of other credit cards I hadn't used in over a year with zero balances on them for department stores, and even an HSBC card, and they went and closed those too. I would follow your attorney's advice. If you had excellent credit before you filed you'll probably get offers for cards after your discharge. We were just discharged in early October and Capital One has sent my wife three offers for an unsecured card with no annual fee and 0% for like 10 months.

Agreed. I had one store card that had no balance and practically never had had a balance. Anything with a balance going into BK though you have to declare anyway so consider it gone.

[oscar]

Thanks for all the replies, folks! I didn't mean to start a feud! But all very interesting.
Am going to give it up, and just stay put and not do anything, pray that all goes well with the 341 and after, and get this part of my life over with so I can move on. Appreciate everyone's response,

Ms. Oscar!!

[backtoschool]

Thanks...probably a waste of $$ like everyone says...I heard somewhere that after the 341 hearing, or after the BK is disposed and a done deal (can't remember which), someone had a conversation with one of their creditors and they worked out a deal where cc agreed to let him keep his card if he paid them the outstanding balance...and they agreed. Of course, I never heard the follow up story i.e. how long did the CC keep his acc't open!

Sometimes creditors will try to get you to reaffirm their debt. There are no guarantees with an unsecured card, that reaffirming the debt would result in the account remaining open indefinitely. Also, the trustee has the ability to approve or disapprove reaffirmation agreements. In any case, paying off one creditor to the exclusion of the others, is a red flag that draws extra attention to your petition and that is never a good thing.

[oscar]

Thanks...probably a waste of $$ like everyone says...I heard somewhere that after the 341 hearing, or after the BK is disposed and a done deal (can't remember which), someone had a conversation with one of their creditors and they worked out a deal where cc agreed to let him keep his card if he paid them the outstanding balance...and they agreed. Of course, I never heard the follow up story i.e. how long did the CC keep his acc't open!

[LaurieM]

ditto....and actually i'm really wondering why one that is a credit councilor is even giving advise ...while it may be your job, as my was a paralegal...i give NO legal advise ONLY LIFE experience responses. the fact you have to recheck an answer does really not sit well for me. and, i'm certain you only have the best intentions....it's just you have not lived this.

lauriem....most all of here, welcome advise and insight for those that have experienced what this situation brings from the inside out...NOT from the outside in.

it may surprise you to know how many people on this site are lawyers and many well educated and informed persons from all walks of life, that not only have the expertise in this field but personally have lived it themselves.

it's always easier looking from the outside in...or is it?

Not to worry... this will be my last visit to this site. I happened upon the site by accident looking for something totally different that what this ended up being anyway... thought I'd offer up some of what I have learned in the work that I do... clearly it's not appreciated.

[oscar]

Thanks for replying...yeah, that's what I figured....