PLEASE Help My Friend - Preferential Treatment issue may delay filing

[FishersMike]

My good friend paid his attorney's cost a few months ago to do a Chapter 7 (I am doing a Chapter 13).

He has been foolish and been using one of his credit cards (and paying it) and getting payday loans (and paying them) in order to eat and survive. He has had to do this due to a wage garnishment and medications he is paying.

Now attorney is saying he has to wait an additional 90 days to file as he has done Preferential Treatment to a creditor. He was not plan on listing or defaulting on this credit card or payday loans.

His he SOL? He is about to have a nervous breakdown (seriously) and I want to know if there could be any exceptions or caselaw to make an exception? I mean many people who live paycheck to paycheck on payday loans are the people who need to do Chapter 7 to get a fresh start.

Any advice would be appreciated!

[scorpion35]

My good friend paid his attorney's cost a few months ago to do a Chapter 7 (I am doing a Chapter 13).

He has been foolish and been using one of his credit cards (and paying it) and getting payday loans (and paying them) in order to eat and survive. He has had to do this due to a wage garnishment and medications he is paying.

Now attorney is saying he has to wait an additional 90 days to file as he has done Preferential Treatment to a creditor. He was not plan on listing or defaulting on this credit card or payday loans.

His he SOL? He is about to have a nervous breakdown (seriously) and I want to know if there could be any exceptions or caselaw to make an exception? I mean many people who live paycheck to paycheck on payday loans are the people who need to do Chapter 7 to get a fresh start.

Any advice would be appreciated!

his lawyer is right.
he will have to wait another 90 days ,because he needs to put at least 90 days between his last payday loan and his last credit card charge
tell him to STOP using his credit card and STOP getting payday loans

he HAS to list EVERY card with a balance on it and he has to list EVERY payday loan
and his credit card will be closed by the issuer as soon as he files

[backtoschool]

90 days is the official definition of "insolvent" for bankruptcy purposes. Any charges made or loans taken 90 days or less before filing are considered fraudulent by definition and the creditor can file an AP and win.

Paying back one creditor and not paying other creditors is considered a preferential payment, and the trustee will go after the creditor for the money.

All credit cards that do not have a zero balance on the day of filing need to be listed on the petition.

Most credit cards with zero balances will be closed as soon as the creditor finds out about the bk filing anyway, so trying to keep the cards open will usually not work.

[Bartleby]

The person stressing out is me (thanks Mike).

So I'm hosed eight ways from Sunday, huh?

I'm grasping at straws here and don't know how else I can pull this off. They're garnishing me. I've not paid the IRS since the garnishment started, the Indiana Department of Revenue got off my back when they found out I was filing (so I'm OK there for now - hopefully I don't lose my professional license because I owe them money), I'm skipping medicine because I can't afford it, and otherwise giving up on everything. The only things I own right now are my car, my clothing, some food, some books, and a few movies.

Does anyone have any help they can offer on this? The payday loans were small (three total IIRC, with the biggest being $150)...so I don't know if that makes a difference (I saw something about a loan of < $600 not being something that'll cause a stink). The credit card in question has a limit of $200.00. I won't use it (or pay on it) again, but...I need a way out of this. All I've done on the card is pay it only to max it out again immediately.

Help?

-Bartleby the Scrivener

[keepinitreal]

Bartleby, you could always file Chapter 7 now and accept that the credit card and payday lender may file an AP against you. Even if you do have to pay the $200 back to the credit card and <$600 back to the payday lender, it may be worth it for the peace of mind you'll receive after you file. Just don't borrow any money from this point forward. Good luck!

[Bartleby]

Bartleby, you could always file Chapter 7 now and accept that the credit card and payday lender may file an AP against you. Even if you do have to pay the $200 back to the credit card and <$600 back to the payday lender, it may be worth it for the peace of mind you'll receive after you file. Just don't borrow any money from this point forward. Good luck!

I've already paid the lender all but the money I borrowed this weekend. I'll be on the phone with the attorney in the morning.

*fingers crossed*

What's an AP?

[backtoschool]

I've already paid the lender all but the money I borrowed this weekend. I'll be on the phone with the attorney in the morning.

*fingers crossed*

What's an AP?

An AP is an Adversary Proceeding which is a separate trial from your bk trial (costs addition money to be represented at too). No creditor is going to file an AP for an amount of $150 or $200, since an AP typically costs $5,000 to file. I would go ahead and file bk now. Do not use the cards or take any more payday loans though.

[Pandora]

.... I'm skipping medicine because I can't afford it, and otherwise giving up on everything.

That's never acceptable I'm sorry you're having to choose between bills and medications. Have you checked your local pharmacies to see what their $4 medications are? Most have this offer now (Walgreens, CVS, Giant, Walmart, Wegmans, etc) and its usually $4 for 30 day script and/or $10 for a 90 day script. See what you're on now and then see if there is an alternate generic that will substitute for it - then ask your doctor to switch to generic. If you have insurance - it may be cheaper to just pay out of pocket vs. using insurance as many meds will end up costing you more if you use your insurance. Example: One of my meds if ran through ins. will cost me $20 for a 90 day supply - however if I just go to Walmart and ask them to run it w/out ins., the same med (exact same dose, maker -everything) will only cost me $10 for a 90 day supply. Makes no sense but thats how it works.

Also - check who the makers of your meds are (if only available brand) and go to their website. Many offer deals anywhere from coupons, to drug cards or assistance for paying. I have one drug card for one of my meds that is brand only - its good for a full 12 months (1 script a month) - and is up to $50 off the med. My copay is $20 for a 30 day supply - however using this card, I pay $0 It takes care of what my copay would have been.

I will post a separate post for where to go. Look for it under the Money Savings area.

[tcreegan]

Hi Bartleby,

Just wanted to concur with both backtoschool and Pandora...

The amounts on your cc and payday loans are not worth going after, but be careful for a threatening letter telling you to pay up. This is standard operating procedure for lots of creditors, they try to bully you into coughing up some cash. If you ignore them, they go away.

I hear you on the meds, I went out on medical disability and the first thing that happened was they canceled my health insurance. Have learned a lot: Pharmacies have special (lower) rates for cash customers, you have to ask for it. All my drugs that don't have a generic have a program for free or low cost pills through the pharm. company that makes them. I always found a link to the program on the website, sometimes had to hunt around but it was there. They have some hoops to jump through but its not bad. One more opportunity, pharm reps often supply Docs with samples. Ask for these to cover you till your low-cost application goes through.

Good luck to you, hope the BK will make your road a little smoother,

Tom in Colo

[CoBelle]

Hi, I'm so sorry for your troubles.
But in regards to credit cards....and I am far from an expert, but if the trustee decided that the payments were preferential, the trustee would go after teh credit card company for a return...not you.
I filed for 13 and had been using my cc's all along, but always paying in full down to zero balance every month. I had no credit card debt and had pd in full for 25 years...but Chase still cancelled by cc's although reported them on the followup credit report as paid in full, never late. Two cards (Am Ex and Barclays) didn't close my accounts and I'd been using them since filing. I had to file a 7 suddenly and thought to pay the cards just before filing.

I really don't think you hve to worry about the 90 days esp if the cards were used for everyday necessitites and not luxury items...which I'm sure they weren't.
I think your attorney might not understand the situation, and I'd be leery of an attorney like that...although we've all learned that every district is different.

[researchnerd]

An AP is an Adversary Proceeding which is a separate trial from your bk trial (costs addition money to be represented at too). No creditor is going to file an AP for an amount of $150 or $200, since an AP typically costs $5,000 to file.

Sorry for the thread hijack, but this is interesting. A creditor recently filed an AP on my case for a secured debt of about $2500, which hardly seems like it would be worth it to them. My attorney says he will file an Answer, but hasn't requested any additional funds. I guess I should prepare for that in case he does.

Bartleby, I don't have anything to add that others haven't said already -- since the amounts are relatively low, I'd think you should be pretty safe if you go ahead and file your Ch7 immediately.

[Bartleby]

Spoke with the attorney...apparently they work past 5pm! I'm good. My signing appointment is Monday and they'll file ~ 1 week after that! I'm safe! I'm going to live! Heck, I'll probably even still have a place to live!

Thanks for the help everyone!

Bartleby the Scrivener

[FishersMike]

Well I am glad it worked out for you. No more payday loans though, okay?