Chapter 7 Concerns

[frankjaeger]

Total CC debt - approx. $22,000
State - PA

My first, and biggest concern: My car is “paid off” (meaning a bank no longer holds the lien), but I pay my grandparents for it monthly (interest free). According to KBB, my car is worth around $12,000, and my state only allows an exemption of $5,000.

So even though it’s technically paid off, to me it’s not, because I still owe them. Will they try and take the car to sell it? If they can get $12k, and then they pay me the $5k exemption, that will leave them with $7k to pay back the creditors. Is that enough for them to try?

My second concern: I have several accounts with no balances. I don’t want to keep them open, and I know they’ll be closed anyways when I file, but will it look better if I close them myself?

Will that creditor show on their side something like “closed by customer request” instead of “closed due to bankruptcy”. Keeping in mind this would be just for my couple accounts with no balances.

Last concern: If I have to use a credit card up until the filing and discharge, for things like gas and groceries and whatnot, will they try and claim it as fraud and attempt to get me to repay that? I heard a rumor that you can’t use any of your cards within X amount of months of filing. Is this true?

Any info helps!

Thanks!

[FireMedic1]

---

@frankjaeger wrote:
Total CC debt - approx. $22,000
State - PA

My first, and biggest concern: My car is “paid off” (meaning a bank no longer holds the lien), but I pay my grandparents for it monthly (interest free). According to KBB, my car is worth around $12,000, and my state only allows an exemption of $5,000.

So even though it’s technically paid off, to me it’s not, because I still owe them. Will they try and take the car to sell it? If they can get $12k, and then they pay me the $5k exemption, that will leave them with $7k to pay back the creditors. Is that enough for them to try? What state?

My second concern: I have several accounts with no balances. I don’t want to keep them open, and I know they’ll be closed anyways when I file, but will it look better if I close them myself? Close them before filing. This way it will say closed by consumer.

Will that creditor show on their side something like “closed by customer request” instead of “closed due to bankruptcy”. Keeping in mind this would be just for my couple accounts with no balances.

Last concern: If I have to use a credit card up until the filing and discharge, for things like gas and groceries and whatnot, will they try and claim it as fraud and attempt to get me to repay that? I heard a rumor that you can’t use any of your cards within X amount of months of filing. Is this true? Normal everyday expenses are one thing. Paying anything over $600 is preferential treatment and not allowed. But to be safe they'll probably say stop using the cards.

Any info helps!

Thanks!

---

Get with a local board certified lawyer and all your questions will be answered with their free consultation.

[sarge12]

OP...you are filing chapter 7 with only 22000 in debt, or do you have other debt not listed? Also, most States have exemption for a car that is limited, and then a "wildcard" that can also be used on the car if you don't need it for furniture or something. Have you talked to a lawyer? 22k is not a lot of debt for chapter 7. Are you employed? The debt to family will be looked at as a gift most likely, so I don't think that will be considered. The bankruptcy laws vary from State to State, even though it is a Federal Court filing. Every State sets rules for exemptions and has different amounts for the means testing as well. Here on these boards, recently someone said you could use the card up until filed, but I would strongly suggest you ask your lawyer about that. As far as the credit cards with 0 balance, you can close them, or just let them close in the bankruptcy, not going to much different either way. I might be able to better advise you with more details such as your pay, and any other debt you have. If the 22000 is your only debt, I will be surprised if they do not require you to file chapter 13. I hope you are hiring a lawyer, and not trying to do this by yourself.

[frankjaeger]

Pennsylvania. Trying to find a good lawyer who can get me in for a consultation sooner than a month out has proven difficult.

[frankjaeger]

$22,000 only and all in CCs. Sorry if that doesn’t seem like a lot to you, but it’s a lot to me. Enough so that I can’t get ahead at all, and making all my $25-$100 minimum monthly payments isn’t getting me anywhere. I am employed full time and single with no children but my monthly take home is only about $1800 after tax, and my monthly expenses are around $1800-$2000.

I have already spoken briefly with one attorney over the phone, who said Chapter 7 would be what I would file in “my situation” but it seems like it’s close to a month before anyone can get me in for an official appointment.

[sarge12]

---

@frankjaeger wrote:
$22,000 only and all in CCs. Sorry if that doesn’t seem like a lot to you, but it’s a lot to me. Enough so that I can’t get ahead at all, and making all my $25-$100 minimum monthly payments isn’t getting me anywhere. I am employed full time and single with no children but my monthly take home is only about $1800 after tax, and my monthly expenses are around $1800-$2000.

I have already spoken briefly with one attorney over the phone, who said Chapter 7 would be what I would file in “my situation” but it seems like it’s close to a month before anyone can get me in for an official appointment.

---

Ok, I understand the fact that you can't get ahead, but there are usually better options for that level of debt, that wont follow you for 10 years. Credit card issuers ar highly motivated to help you avoid bankruptcy. Often they can and will work with you by lowering or even eliminating the interest on the cards until the situation improves, and even lowering the minimum payments for a while. There are credit counseling services that are non-profit, and may be able to help as well. A bankruptcy filing will likely cost you a few thousand dollars in itself, so in the month it will take to see the lawyer you should explore if that is really the best option. I know the burden of the debt is troubling, but I have seldom heard of someone declaring bankruptcy for that amount of debt that did not regret it later. It might wind up being the only option even after exploring all other options, but for the level of debt you have, you should definitely explore all other options.

[frankjaeger]

I’m not really worried about how long it follows me as I’m only in my 20s. So I’m young enough that I can easily recoup from this.

I’m also not really looking to keep making these monthly payments because it leaves me with negative money every month. I have a relative willing to help with the lawyer fees, which I was told would only be about $1,800 total for everything.

I’ve looked into some of those non-profit debt consolidation and relief programs and they have terrible terrible reviews. My buddy did it, and his plan was five years to have everything paid off. In that time, with bankruptcy, my credit would already be mostly rebuilt and I would be halfway done with it.

[sarge12]

OK, it seems you have already explored some options, but the relatively small amount of debt was what had me questioning the filing. I do admire the fact that you did not wait until you were 100,000 dollars in the hole before realizing it was unsustainable, and most people here that have filed waited too long to do so. I just wanted to make you aware of other options, since bankruptcy is such a major step. I am sure you are probably already aware that it can even keep you from getting some jobs. There is not a lot of jobs that do a credit check as part of the application process, but both drug screenings and credit checks are a growing trend. I hope you learn from it because I know an idiot who had to file twice, ch.13, and ch.7 before he learned his lesson. I still see that idiot in the mirror every morning.

[Shooting-For-800]

---

@frankjaeger wrote:
Total CC debt - approx. $22,000
State - PA

My first, and biggest concern: My car is “paid off” (meaning a bank no longer holds the lien), but I pay my grandparents for it monthly (interest free). According to KBB, my car is worth around $12,000, and my state only allows an exemption of $5,000.What is the TRADE IN value at fair condition?  Does your state have a wildcard exemption?  Personal exemption?  

I would get a notorized loan agreement and backdate it for your grandparents.  Do not lie about anything!  It does have a loan on it.  Make sure to include to VIN number and SECURED loan agreement title.  That may be enough.  Do you have proof of paying each month?  That will also help.

So even though it’s technically paid off, to me it’s not, because I still owe them. Will they try and take the car to sell it? If they can get $12k, and then they pay me the $5k exemption, that will leave them with $7k to pay back the creditors. Is that enough for them to try?
$7k is enough for them to take it.  They won't get $7k, maybe $2k or $3k that is why real value is important.  Also trustees (in some states) can work out a payment play for property that one wants to keep if not exempt.  In other words, they may give you 12 months to pay them $5k to keep the car.

My second concern: I have several accounts with no balances. I don’t want to keep them open, and I know they’ll be closed anyways when I file, but will it look better if I close them myself? 
Probably not but I would.  Future opening may be easier with those companies since they have no direct involvement with your BK.

Will that creditor show on their side something like “closed by customer request” instead of “closed due to bankruptcy”. Keeping in mind this would be just for my couple accounts with no balances.

Last concern: If I have to use a credit card up until the filing and discharge, for things like gas and groceries and whatnot, will they try and claim it as fraud and attempt to get me to repay that? I heard a rumor that you can’t use any of your cards within X amount of months of filing. Is this true?
Yes and no.  I would not use any cards 30 days before but they are looking for purchases that do not align with someone struggling with their bills like jewelry or electronics or trips, etc.  It is bad form to use a card when you know you are going to file.  Quit using cards and quit paying them.  Save CASH.

Any info helps!
Most credit cards will settle for 20%-60% of their balances without a BK or debt company.  You can negotiate your own settlements.  After you stop paying for 90 days, the offers start coming to settle.  Can you pay $200-$400 per month over the next 2 or 3 years to avoid BK?  You are going to pay an attorney $2k and your balances are only $22k.  If you settled for $10k that is only $8k ($222 x 36 months) to avoid BK.  You could also get some 0% cards, etc.

Thanks!

GL!

---

[Anonymous]

In your 20s with no kids is the perfect scenario in which you could get a second job and knock this out.

Also depending on how much you still owe your grandparents for the car, it may be worth selling it, paying them off, buying a cheap car, and getting a jump start on your debt with the rest.