Chapter 7 -- Wait or File In December?

[kaybean22]

I'm meeting with an attorney for the 2nd time today (we last met in August, and I decided not to file then) but I wanted some opinions (obviously, he'll have some good answers too...)

I'm in a sweet spot right now to file for Chapter 7. I work for myself, and the last 3 months I haven't made much AND had significant expenses. My net profit is actually only around $1k. 

The problem? I opened up a new credit card in September and took out 4k in cash advances because I made nothing and the balance is now around 8k.

I also took out a kabbage loan TWO weeks ago for 4k.

In trying to save my credit score, I've also been making hefty payments to almost all my lenders. Not sure if those qualify as preferential, since everyone's been getting around $1k a month (as you can see, I've been robbing one account to pay the other. Oops.)

If I wait 90 days for all this to wash over, I might lose my sweet spot of being able to fall into Chapter 7 -- especially since the next few months are looking REALLY good and I don't expect as many expenses the next 2-3 months aside from basic overhead costs. I'll probably fail the second part of the means test, too (too much disposable income.)

Do I file Ch 7 now while I can and risk some debts not being dischargable? Will this make the case harder to deal with?

[CH-7-Mission-Accomplished]

I find this whole post to be very disturbing.  Sorry about that.

You seem to have an exceptionally good grasp on the meaning of preferential payments and the dangers of taking out loans right before filing (presumptively fraud) and yet you have done both.  Also, you refer to the "sweet spot" for filing, but shortly that "sweet spot" will be gone and you will have too much disposable income?  Seems to me you don't have any disposable income if you are paying your debts.

You should put these facts in front of your lawyer and see what they say.  I would be particulary worried about those two recent loans.  Borrowing 4K from lender A (who you are about to screw) to pay lenders B, C and D would certainly be considered preferential treatment and presumed fraud!

[Anonymous]

Hate to see anybody file bk for less than $15k (?) of debt. Is it possible to seriously lower monthly overhead and pay things down, given your outlook for the next few months is looking so good?

Credit scores would be the least of my concerns, those can be fixed later.

Just my thoughts from somebody who's been through bk. Whatever your decision, I wish you the best.

[Anonymous]

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@kaybean22 wrote:

I'm meeting with an attorney for the 2nd time today (we last met in August, and I decided not to file then) but I wanted some opinions (obviously, he'll have some good answers too...)

I'm in a sweet spot right now to file for Chapter 7. I work for myself, and the last 3 months I haven't made much AND had significant expenses. My net profit is actually only around $1k. 

The problem? I opened up a new credit card in September and took out 4k in cash advances because I made nothing and the balance is now around 8k.

I also took out a kabbage loan TWO weeks ago for 4k.

In trying to save my credit score, I've also been making hefty payments to almost all my lenders. Not sure if those qualify as preferential, since everyone's been getting around $1k a month (as you can see, I've been robbing one account to pay the other. Oops.)

If I wait 90 days for all this to wash over, I might lose my sweet spot of being able to fall into Chapter 7 -- especially since the next few months are looking REALLY good and I don't expect as many expenses the next 2-3 months aside from basic overhead costs. I'll probably fail the second part of the means test, too (too much disposable income.)

Do I file Ch 7 now while I can and risk some debts not being dischargable? Will this make the case harder to deal with?

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This is a hot mess. I unfortunately can't offer anything except see what your attorney says.

[kaybean22]

I didn't have any intention of filiing until about 5 days ago. I really thought I could pay it all off over time, but had a breakdown / come to Jesus moment with my ex-husband (we still live together -- yes, it's complicated) and realized I'm paying around $3k a month in debt even without the recent $1k-to-each-lender overpayments... which only happened because I had taken cash advances from the new credit card to live on.

None of this was planned. It was something I should have done 3 months ago, but agreed with then-husband we can climb out if it ourselves. If only.

And I only know the terminology because I spent the whole weekend doing research and putting together info for the attorney. When I talked with my lawyer on Friday, he didn't seem to concerned about all of this other than it may not be dischargable. I also realized that I was in a sweet spot for Chapter 7 on my own looking at my projected income/expenses.

In hindsight, no, I shouldn't have taken out the loan or used the credit card. Or made payments. But I wasn't planning on filing. 

[kaybean22]

I actually have over six figures of consumer debt. Over 3k in monthly payments, which is more than I usually make per month.

[Anonymous]

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@kaybean22 wrote:

I didn't have any intention of filiing until about 5 days ago. I really thought I could pay it all off over time, but had a breakdown / come to Jesus moment with my ex-husband (we still live together -- yes, it's complicated) and realized I'm paying around $3k a month in debt even without the recent $1k-to-each-lender overpayments... which only happened because I had taken cash advances from the new credit card to live on.

None of this was planned. It was something I should have done 3 months ago, but agreed with then-husband we can climb out if it ourselves. If only.

And I only know the terminology because I spent the whole weekend doing research and putting together info for the attorney. When I talked with my lawyer on Friday, he didn't seem to concerned about all of this other than it may not be dischargable. I also realized that I was in a sweet spot for Chapter 7 on my own looking at my projected income/expenses.

In hindsight, no, I shouldn't have taken out the loan or used the credit card. Or made payments. But I wasn't planning on filing. 

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I think we all go back and forth on the decision. Wishing you the best of luck!

[Anonymous]

Be very upfront with your attorney, and hope for the best. Happy Holidays.....

[StartingOver10]

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@kaybean22 wrote:

I didn't have any intention of filiing until about 5 days ago. I really thought I could pay it all off over time, but had a breakdown / come to Jesus moment with my ex-husband (we still live together -- yes, it's complicated) and realized I'm paying around $3k a month in debt even without the recent $1k-to-each-lender overpayments... which only happened because I had taken cash advances from the new credit card to live on.

None of this was planned. It was something I should have done 3 months ago, but agreed with then-husband we can climb out if it ourselves. If only.

And I only know the terminology because I spent the whole weekend doing research and putting together info for the attorney. When I talked with my lawyer on Friday, he didn't seem to concerned about all of this other than it may not be dischargable. I also realized that I was in a sweet spot for Chapter 7 on my own looking at my projected income/expenses.

In hindsight, no, I shouldn't have taken out the loan or used the credit card. Or made payments. But I wasn't planning on filing. 

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^^^This would be tough to prove (highlighted in red) since you had a meeting with a Bk attorney in August.  It looks like you planned the whole thing. I am not saying that you did, just that it looks like it. Unfortunately for you, the trustee will probably catch it. That is their job. They know what to look for and have access to all of your records.

This is my personal opinion:  I think it would be terrible timing for you to file now given the information you provided in your first post. The likelihood of the debt for the cash advance not being dischargeable is high.  I don't know if the entire Bk would be dismissed with none of your debt being dischargeable due to your actions the last 90 days. 

Here is a quick link on fraud to get you started in understanding the consequences:  http://www.nolo.com/legal-encyclopedia/what-not-do-before-bankruptcy.html

http://www.nolo.com/legal-encyclopedia/bankruptcy-trustee-suspects-fraud.html

If I were in your shoes, I would find another way and work on the debt until at least a year passes from the time of the cash advances and preferential payments.  You may be in much better position to get this handled without a Bk. At least you won't suffer the consequences of Bk fraud. 

[kaybean22]

Update: Had my meeting and did all the worksheets, ETC. As it turns out, I don't qualify for CH 7 anyways. In the last few weeks, a few things fell off my credit report and I finally settled a huge debt with USAA, so there's no point in doing a Ch 13 with only a few consumer debts left, plus the things I can't/wont't discharge -- my car, recent credit card and student loans.

Thanks for all of the advice -- and FYI, those payday loans? Super easy to discharge because they don't have the time or resources to fight it. Also, if you have a recent credit card -- especially with a local bank (credit union) you can often reaffirm and keep it open.