Old credit card debt

[cz3ch]

Originally I was in a Chapter 7 but am converting to a Chapter 13 due to a change in finances. My lawyer and I are meeting next week but I've been doing my own research on bankruptcy fraud and using credit cards and had a question.

On my credit report there are a couple of old accounts where they have balances but no payment was reported. These are 3-4 years old and I haven't had a credit card in over 2 years. How is this looked upon by the creditors/etc considering I'm filing a Chapter 13 to pay everyone back. I know that per the bankruptcy code any charges made within 90 days of filing will surely be questioned, possibly discharged, and may be fraudulent. But how is old debt like this handled.

I've spooked myself already into thinking I'm getting in trouble for not paying and going to jail and could really use some advice.

[TrainWreak]

Well if that were the case I would be sitting in jail.
All of my old unpaid credit card debt was discharged in chapter 13 except for a very small percentage that was paid back through the plan.
Just be sure to include them on the petition.

[cz3ch]

Well if that were the case I would be sitting in jail.
All of my old unpaid credit card debt was discharged in chapter 13 except for a very small percentage that was paid back through the plan.
Just be sure to include them on the petition.

Yes, everything was included on the petition and is correct. I just didn't know if those accounts would be questioned since they were not paid on and were 3-4 years ago. I'm assuming you had similar listings in your creditors from the sound of your post. My lawyer initially went through my debts and didn't see any problems so I guess I'm spooking myself out?

[justbroke]

You are spooking yourself and overthinking everything. The bankruptcy will discharge all debts. A Chapter 13 may pay "something" to the unsecured creditors, but upon discharge of the Chapter 13 (or any Chapter of bankruptcy for an individual), you will no longer have any legal obligation to pay those debts.

For a Chapter 13, however, I would make sure that all debts are scheduled (listed) since anything which his not scheduled in a Chapter 13 would not be discharged. (There are some debts which are never discharged anyhow, but that's not a scheduling problem.)

[cz3ch]

You are spooking yourself and overthinking everything. The bankruptcy will discharge all debts. A Chapter 13 may pay "something" to the unsecured creditors, but upon discharge of the Chapter 13 (or any Chapter of bankruptcy for an individual), you will no longer have any legal obligation to pay those debts.

For a Chapter 13, however, I would make sure that all debts are scheduled (listed) since anything which his not scheduled in a Chapter 13 would not be discharged. (There are some debts which are never discharged anyhow, but that's not a scheduling problem.)

You are right I am. I just thought that because I had old accounts that were never paid on that it would be red flagged for fraud. I was conscious of the 90 days prior to filing but didn't know how old debts that never had payments were looked upon.

My creditor schedule is accurate and has everyone listed with their amounts/etc.

[justbroke]

Hardly anyone ever gets sued in Chapter 13s for spending within the 90 days or for "fraud". It is more common in Chapter 7s, and even in the Chapter 7s, the creditors are usually going after very large amounts (> $4,000). Many times those creditors do so in Chapter 7s because the debtor took out "large" cash advances (or balance transfers). The creditor is simply trying to get that specific debt determined to be non-dischargeable.

You should not be worried about these things.

[cz3ch]

Thanks for the reassurance, JB. I'm just waiting on the conversion to 13 now and our meeting next week to make corrections. I think after this meeting a lot of my fears will be put to rest. Again thanks for the insight and help.

[LadyInTheRed]

cz3ch, you are definitely worrying too much. If you aren't trying to hide anything, you have nothing to worry about.

I do want to say something about fraud. People hear the term fraud in connection with charges within 90 days of filing BK and get needlessly worried.

The presumption of fraud comes from Bankruptcy Code Section 523(a) which describes certain debts that are not dischargeable. Here are is subparagraph (2) of Section 523(a) describing a certain category of debts that are not dischargeable:

(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive; or
(C)
(i) for purposes of subparagraph (A)—
(I) consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and
(II) cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable; and
(ii) for purposes of this subparagraph—
(I) the terms “consumer”, “credit”, and “open end credit plan” have the same meanings as in section 103 of the Truth in Lending Act; and
(II) the term “luxury goods or services” does not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor

You can read all of Section 523 at http://www.law.cornell.edu/uscode/text/11/523

Charges within 90 days of bankruptcy are commonly referred to as fraudulent, but the code only says they are presumed non dischargeable, not that they are presumed fraud. The term fraud comes from the reference to subparagraph (A). We could just as easily say that they are presumed to be made under false pretenses. To go to jail for fraud, you would have to be tried and found guilty of criminal fraud. Not likely to happen for a few hundred dollars in charges on a credit card.

Also, note that it is charges for luxury goods and services that are considered non dischargeable. The purpose of the law is to prevent people from going on spending sprees before filing BK knowing that the debt will be discharged. It is not intended to punish people who used their credit cards to survive up to the time they filed BK. For example, if you charge an expensive vacation or a fur coat within 90 days of filing BK and the creditor objects to the discharge of that debt, you will still have to pay the debt after your BK. If you used a credit card to buy eggs and milk to feed your family and pay your electric bill, the debt is not presumed to be non dischargeable.

If you file BK with debt that is presumed nondischargeable under Section 523, you will not go to jail as a result of filing BK. You just won't have that debt discharged.

[justbroke]

Thank you LITR for the thorough response. I thought I had mentioned something about the fraud not being "criminal fraud", but it may have been in another thread.

[cz3ch]

Thank you LITR for the thorough response. I thought I had mentioned something about the fraud not being "criminal fraud", but it may have been in another thread.

Thank you to both JB and LITR. You've brought my stress levels from 100 to about 75 I was just worried about the old accounts from 3-4 years ago. I guess I just needed educating in the matter. Ok, no more researching "you're going to jail" lol

[kornellred]

First of all, cz3ch - no respectable bankruptcy attorney is going to file a petition on your behalf if there is any unsecured credit purchasing activity within 90 days of the filing date. You could be guilty as hell of fraud and the creditors will not be able to prove it. Debtors know a long time in advance that they will eventually file for bankruptcy - it's not like it sneaks up on you. The 2005 BAPCPA legislation was really the lending industry's best remedy against the inevitability of credit abuse - now a debtor must pass a means test to qualify for Chapter 7 debt liquidation.
The only way you will go to jail is if you actually put yourself there.

[cz3ch]

First of all, cz3ch - no respectable bankruptcy attorney is going to file a petition on your behalf if there is any unsecured credit purchasing activity within 90 days of the filing date. You could be guilty as hell of fraud and the creditors will not be able to prove it. Debtors know a long time in advance that they will eventually file for bankruptcy - it's not like it sneaks up on you. The 2005 BAPCPA legislation was really the lending industry's best remedy against the inevitability of credit abuse - now a debtor must pass a means test to qualify for Chapter 7 debt liquidation.
The only way you will go to jail is if you actually put yourself there.

I understand your point. My question was in regards to the 3-4 year old accounts. I've not had any credit card activity in almost 2 years. My attorney reviewed my creditors list and accounts and didn't raise up a red flag but I simply was curious about the real old stuff. I'm surely not doing anything to put myself in jeopardy just staying honest and trying to educate myself at the same time.

[LadyInTheRed]

First of all, cz3ch - no respectable bankruptcy attorney is going to file a petition on your behalf if there is any unsecured credit purchasing activity within 90 days of the filing date.

I disagree. If the charges don't fall under the presumption that they are not dischargeable, there is nothing wrong with filing before the expiration of the 90 days. To be sure to avoid having to deal with objections, it is safest to wait out the 90 days. But, sometimes there are good reasons not to wait.

[cz3ch]

I disagree. If the charges don't fall under the presumption that they are not dischargeable, there is nothing wrong with filing before the expiration of the 90 days. To be sure to avoid have to deal with objections, it is safest to wait out the 90 days. But, sometimes there are good reasons not to wait.

Again I'm glad I haven't had credit card activity in 2 years. I've done my best to stay away from credit cards as a whole.

[LadyInTheRed]

Again I'm glad I haven't had credit card activity in 2 years. I've done my best to stay away from credit cards as a whole.

Yes, you have nothing to worry about based on credit card charges from 2 years ago. The fact that you have learned to live without credit will help you have a successful Chap 13.