My story - Long Read - Advise Please

[AboveMyMeans]

My stats:
TOTAL - $30k of credit card debt

I also have a company AMEX in my name that must be paid in full every month. I travel for work (as a consultant) so my work-expenses are pretty high. I spend around $7,000/month in travel expenses, and at any given time the balance of that card might be $0-to-$7k. I will continue to travel like this during bankruptcy, so after filing that card will also be cancelled. I imagine that I will need to have a family member certify me as an authorized user and issue me a credit card on their account. I get reimbursed 1-to-1, so repayment of those expenses is not an issue.


- I make a pre-tax total of right at $60k/year. And take home after-tax around $3k/month.
- I contribute 6% to my 401(k), and a current balance of around $11k. Which is exempt, right?Is my travel/expense reimbursement considered income at any point?

I have a monthly budget of the following:


Total Monthly Expenses: $2900

I have no hard assets.
I rent my apartment.
I sold my car to cut expenses and payoff debt.


My questions:

Is filing Chapter 7 even a possibility for me? Would I qualify? If not eligible for Chapter 7, is Chapter 13 worth filing in my situation? What is the worst long-lasting side effect to filing for bankruptcy? Summary:

[hereforinfo]

I don't think you are a candidate for bankruptcy. You can't go out and charge a $10k diamond ring and then discharge it, that's abusing the system. You have the means to pay back your debt, so do it.

[AboveMyMeans]

I appreciate your response hereforinfo. But your comment that it's "abusing the system" seems very subjective.

Technically, can't I charge a diamond ring and 6+ mos later it's off the radar, and I can file?

And I don't REALLY have the means to pay it back now. I am getting by each month just paying the minimum payments on each CC...not making any headway into the principal. And that includes cutting many "reasonable expenses" out of my life. Under BK protection I think I could add these "reasonable expenses" back into my budget, and at the same time have a blank slate to begin saving instead of paying.

I didn't expect a semi-flame in this forum, because the majority of people filing BK have had financially irresponsible action(s) to get to their position. Some people have lost their jobs, other are business owners trying to expand and taking on too much risk...I had a gambling/alcohol addiction and a problem abusing consumer credit.

Now that I have these problems under control, it seems like a waste to spend the next 5+ years paying for it financially if there is a way out. I'm just trying to figure out if the pro's outweigh the con's...or which path is ultimately better in the long run.

Thanks.

[nc73]

30k isn't much, you can transfer those cards to a lower interest one. 400 a month on food?? All you have to do is budget and you will pay that debt off. Hold on here, how can you eat out during travel and have that as an expense when you get a per diem??? I think you're taking advantage of the system.

[AboveMyMeans]

30k isn't much, you can transfer those cards to a lower interest one. 400 a month on food?? All you have to do is budget and you will pay that debt off. Hold on here, how can you eat out during travel and have that as an expense when you get a per diem??? I think you're taking advantage of the system.

I can't. The idea is I make money off my perdiem, I get more than I spend. Say I spend $400/month on average, and I get $1000/month from my PerDiem on average. I'm making $600/month on my PerDiem, but that is not a consistent figure. I probably didn't explain it very well in my post.


So I understand the 106k is a TOTALLY different story than 30k, but the first page of replies in this thread all sort of imply that you might as well file BK, banks will write-off the debt, and then you can begin amassing wealth...INSTEAD of all the work just to break even. I don't want to go into super-crazy-penny-saver-mode for the next 5 years or so if I don't have to.

I also feel as though it's taking advantage of the system to a degree, but if it's all about staying within the parameters of the law...do I have a case for Chapter 7? And does anyone think the lasting consequences are greater than the potential gain from wiping my credit cards out?

Thanks for your reply, nc70.

[Ann]

AboveMyMeans, I cannot say whether you should or should not file for bankruptcy (which is why you posted here to begin with) but I would suggest you call around and find a few lawyers who will give you a free consultation. The lawyer can sit down with you and look at what you have and give you an idea about whether you can file for a 7 or 13 or possibly neither. I'm new to all of this too.

[nc73]

You're even admitting that you make money from the per diem. I'd say that's income but the courts probably won't. You're better off than most from what I can see. If you want to take advantage go ahead but I think you'll find you'll be made to pay some of it back. You should do the means test and see how you get on first. Trust me on your income you are fine. Try living on a 37k dollar income with a family of 4. Sure I get tax credits here in the UK but that still doesn't allow me any disposable income. Next year my tax credits go down in half because I earn more. That's why none of my debts have been paid and that's why I have to file.

[JoePlumber]

Sufficient Income....

You have 30K in CC debt yet you got a Ring you recently bought, one thing they will know is that a recent charge probably will be known and if it's a significant portion of your debt your wanting to delete and your hiding... the BK will be denied... Hiding assets that can be resold is fraud and your trying to keep all your stuff and erase your debt like your just special, even though you can pay your bills and live off your Work expense money as though your poor.... The Courts will find out and you can pay your bills.... now if you lost your job and couldn't keep up, then BK is just for that reason... not because you feel you've charged too much and now you want to do it again, as you will with the Attitude you have already shown, like its an eraser on a chalk board.

The budget, that you should build will show Quick signs of getting yourself out of debt, yet it seems you don't even want to try to pay your bills. Yet you didn't even think to wait on that Ring purchase to bring another into your life, so you can spoil her with more stuff if you do be a BK filing judgment in your favor...

Quit pondering and pay your bills you can afford,,, some of us have real problems and No Jobs...

Pay off the 2K then the 5K and within a year you could be with just Two cards and living much better...I believe you have more disposable income your just trying to keep your money and erase your debts and have fun instead of being responsible... BK won't allow you to erase debts you can afford simply cause your barely making ends meet, apply that per diem to your CC and your ahead very fast if you watch your spending for a while...

[hereforinfo]

It sounds like you charged that ring recently? Then obviously you haven't gotten your issues with credit usage under control. So what if it's within the law? So is quitting your job and going on welfare and food stamps to milk the system forever but that doesn't make it right. People who take advantage of the system make it harder for those who truly are in need of bankruptcy protection. You know what they say, one bad apple spoils the whole bunch.

Including your per diem, your monthly net is $4000. Your expenses are $2900. You have $1100 disposable income each month. By the way, why is your net pay so low? do you have extra income tax withheld and end up with a hefty tax refund? If so, that's income too.

[monkatom]

Maybe I am missing something but you say your income is 3,000 a month and your bills are 2,900 therefore you are barely getting by. But didn't you say you also get an extra 1K for per diem so in reality you are making 4K a month with 2,900 in expenses therefore you have 1,100 to pay down your CC's?

[StartingOver08]

Based on your post, BK is not for you. You have $30k in debt and gross $60k/yr plus your per diem of $1100/mth.

Your travel expenses are high - no question. I'm sure there is something you can do to reduce those expenses.

The Trustee can go back much longer than 6 mths to review your credit card statements. It is at the option of the Trustee how far back they can go. You would have to disclose the diamond ring, I am fairly certain since it is a recent gift.

Just to give you an idea, I had to provide 3 yrs cc statments, 2 yrs bank statements, 4 yrs tax returns etc etc. The Trustee's job is to find assets/money. So if you charged the $10,000 on a credit card, the Trustee will notice it. If you paid cash for it, the Trustee will notice it. They know what to look for and trying to hide assets/income is not the way to go in a BK.

Once the Trustee see's your income and you will have to revise your budget to accomodate a Ch 13. You have plenty of income for the Trustee to go after you for 100% payback in a Ch 13. You will not be allowed to spend money the way you choose to spend it now in a Ch 13. The expenses have to be allowed expenses and the budget/plan is detailed and must be approved by the Trustee/court.

You could achieve the same result, without having to go thru the Ch 13 by going to Financial Peace University or listening and learning from Dave Ramsey. JMO.

[southernbelle]

I think I'm going to agree with everyone else on this one. You seem to have a substantial amount of disposable income (especially when you add the per diem) and it's the TT's job is to find assets. Since you are currently single I think you might be able to get a handle on things without filing BK and (JMO) but you also seem to want a quick fix to jump start your new life with your fiance.

As opposed to the average BK filer you seem to have the means to solve your problems and might be looking for angles to cheat the system to suit you own needs. Sorry if this sounds unsympathetic but a $10k ring is a bit much. To agree with StartingOver, I had to produce a years worth of receipts, banking statements and cc statements which means there is no hard and fast rule limiting the TT to a 6 month snapshot of your finances if he/she believes you might be hiding something. They will request whatever they feel is necessary to locate hidden assets.

You are required to disclose any/everything when filing BK. The people in this forum filed BK and REALLY need the relief BK can provide. This is a serious business and should be treated as such. Don't take this lightly because you could end up in a chapter 13 or in serious trouble with the court. You might need some budgeting help to get your expenses under control.

Your best option at this point might be to have a few free consultations with BK attys to find out what your options are to really understand what you will be able to do. The only way to get an honest opinion from a BK atty is to disclose everything and be honest. Good luck.

JMO anyway.

[AboveMyMeans]

Thank you everyone for the input!

The ring in serious concern was purchased over 6 mos ago. It was my understanding that the older the expense (and longer paid on), the less likely a big bank was to come for a closer look. It sounds like I was wrong.

The Per Diem is a short-term income as I move from project to project. This current Per Diem will last through Feb2010, but then it is uncertain if I will receive an extra stipend on my next project. Many clients only expense actuals, where I don't have an opportunity to "make" any money from my daily expenses. So short answer, its sort of a bonus for now, but technically speaking the IRS doesn't view travel reimbursements as income.

As many of you have said, I DO mathematically have the means to pay back my CC debt, but over a long period of time. I guess I was just looking for options.

A) I could pay all of the CC debt back, and live prudently for many years. After 5 years or so: I would be debt-free, have a net worth of $0, and no BK on my credit report. (which is what I have been doing for the last 5-6 mos)

or B) I could file BK, and wipe my CC debt clean. After the same 5 years or so: I would be debt-free, have a net worth of $30K plus the interest, and a BK on my credit report.

So should I even care about the BK on my record? It's my idea that society has placed this stigma on BK that you are a deadbeat, etc. I feel as though the seriousness of BK is over-hyped and not as detrimental to one's personal life as it's made out to be.

Thanks.

[AboveMyMeans]

Hereforinfo, my Net pay is low because in addition to making a 6% 401K contribution, I am also paying off a 401k loan.

Are the contributions to your 401k considered income?

[Ifonly]

I'm guessing at your age but you seem relatively young. Filing BK is serious business which at the end of the day no one can decide but you but it sounds as if you have the resources to repay your debt while still being relatively comfortable.

First word of advice - either cut down or stop your 401K contribution - use this money to repay debt. Yes, it's great to save for your retirement but you're probably losing more on the interest on the credit cards than you're earning in the 401K. Obviously, continue to pay the loan back. When you're debt free than you can contribute even more to a 401K.

I understand than by traveling extensively, it is more difficult to NOT eat out. But I bet you haven't looked at the little things - do you grab that cup of Starbucks at the airport? The bottled water? A little snack? Those items can be packed in travel mugs (rinse it out in the bathroom and pack it back in your carryon). Do you grab that latest copy of US magazine to read on the plane? Borrow a book from the library. Every time you say to yourself, "I would have just spent $5 but I didn't" take that money and put it in an envelope towards repaying your debt.

When you dine out when traveling do you kick back with a glass of wine? Have one glass of wine every OTHER meal when you're out. Better for your waistline as well as your pocketbook. Alcohol drives up your restaurant bill like no other. Check out restaurant.com when you're traveling. Local restaurants offer these gift certificates to increase their business and you can cut your bill in half. Once again put that money in an envelope.

I agree with the other posters that with your per diem, income and the level of your debt, you can dig out of this on your own. And I wouldn't count on filing BK and "oh, I'll just use someone else's card to travel." You could really make waves at work and not in a good way.

Also, you should make some of these changes and put some of the money aside so in case of a genuine life emergency, you don't have to use debt. I think you can do this.

I hate to tell you this but that ring price tag could have paid for your wedding. I would definitely consider NOT going all out on that day. You don't need the best band, a video guy, etc. And maybe wait a few years and save that money for that day rather than putting it on credit.

Learn from the mistakes of people like I and other posters who are 40 or 50 years old and didn't STOP when they only had $30K of debt - we kept thinking, "oh, that next bonus." Or, "I'll get a raise" but oops, now I'm pregnant and there goes my income at all. Plan a bit.