consolidation then BK

[silvercert]

Can I do a consolidation now and later file BK? And anyone know some advantages to consolidation vs. BK? I think Consolidation might be better for me right now, just looking for opinions.

[RedLight]

I guess it really depends on your situation. If I were you and were considering the option of a bk, I would have a couple consultations with attorneys in your area. That way you can get some straight facts and find a good atty in case you need them. Just my opinion.

[Phillymanhere]

The problem with consolidations as I understand the law (and I'm a newbie) is that the consolidating creditor can come back and accuse you of fraud later on. And in fact, if you are indeed planning on filing bk, then proceeding on this basis would indeed be fraud. Now, I'm not being judgmental. I mean "fraud" in the civil business sense of "you should have known that you could not pay back the money you borrowed from us. Therefore it is fraud."

Just for background: many of us on this board are most worried about recent cash advances. Huge cash advances are looked on critically by the court and the general advice here is to put a large amount of time between any sizeable cash advance (maybe over $5K) and your actual filing for bk. To take a huge advance and turn around and quickly file for bk is courting disaster. I imagine a loan consolidation would be looked up as basically a huge cash advance.

Here is where I also see trouble: bank x that gives you the consolidation loan, I think, is more likely to challenge you in bk court and demand repayment of part of the amount you borrowed. What limits challenges by smaller creditors is that they have to hire a lawyer, yada yada and the amount they are trying to get back from you is too small to justify the cost of aggressive legal action contesting your bankruptcy.

But if you have one creditor. I think it's far more likely that that one creditor will be aggressive in reviewing your bankruptcy, because they will have a LOT to recover.

That's just my initial thinking ....My gut sense is that if bankruptcy has seriously crossed your mind, it's probably time for you to admit that and start seriously investigating it. Consolidation might just be another act of denial on your part, which a lot of us bk filers are good at.

I'm thinking that if you're even thinking about bk, then you're already way over your head.

[AngelinaCatHub]

Clap, Clap, Clap, Philly. Right on the nose. 'Hub

[treehugger1]

I would agree with Philly. If you cannot follow through on an unsecured consolidation loan and make several payments, then you could be in trouble. This is quite different than attempting a workout agreement with original creditors and defaulting (In such a case, the loan is the same, but under whatever circumstances, you could not pay it.)

Whether a consolidation loan could result in fraud is open to interpretation. The fact that one takes out a consolidation loan, in good faith, in an attempt to pay your debts may not necessarily be a bad thing. It all depends upon the creditor, trustee, and your intentions. In addition, I would guess if your made several months payments on the consolidation loan, this might not be suspect. Only you would know about the latter.

If you think you are heading to bankruptcy and cannot even make future payments on a consolidation, why bother? Simply stop paying unsecured creditors and wait for the sh*t to hit the fan. You'll probably have 90 - 120 days before anyone makes a move to take you to court. But, you had better be sure that you are willing to go the BK route, because you can expect suits, etc., after some time goes by.

If you can't afford garnishment, liens, etc., then you might want to consider BK very soon.

Just my humble opinion.

TH

[Help!]

I'm with Phillyman on this one. If you would be taking out these loans with doubt that you'll be able to repay them, consolidation would not be viewed as a "last ditch effort"... it would be viewed as fraud. Even if you feel you can explain it, would you really want to have to (after a creditor or US Trustee puts a 707 fraud flag on your case)?

The debt consolidation loans we took out last year got us nowhere. They may have allowed us to make minimum payments on our debt for a little while longer, but they failed to address the root cause of our debt... an unrealistic budget.

[HHM]

Think big picture here, what is the point of consolidating if you are going to file BK.

The others are right, you would be shooting your BK in the foot if you consolidated first then filed BK. If the issue is that you need to save some money, simply stop paying your creditors.