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Would I Run Into Trouble Filing a Chapter 7 Bankruptcy? – Lee

“Dear Steve,

Since last March, I have charged $30,000.00 in Credit Card purchases. The bulk of this was March thru May 2008. In May My hours were reduced (At that point I was using my credit card for survival. I.E. Groceries, Gas, Utilities, Car Repairs and needs). In August I was laid off and still am.

In Mid December I stopped using my credit cards all together. Right now I am considering Bankruptcy with $52,000.00 in Credit Card debt. For the last year I have strung Nine cards along with minimum payments while using the cards as described above. My wife also took 5 new cards in her name in April 2008 and they combined have a balance of $16,000.00. (This is part of the $30,000.00 in charges). My Wife as of this month is unemployed from a job she had for a year and a half. My unemployment will run out in April 2009 ($320.00 per week).

Based on my story above, would I run into problems filing a Chapter Seven BK in March 2009? All my debts are Credit Card and my Assets are minimal with a home that had lost all of its equity due to the housing market.

Lee”

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The Answer

 

Dear Lee,

The last thing you need from me is a lecture on using credit cards without an expectation that you will be able to repay them, so I’ll skip that.

I think the situation is what it is and the absolutely best advice is that you need to go and meet with three different bankruptcy attorneys in your area. Why three? I just want to you to find a bankruptcy attorney you are comfortable working with and also get at least two to agree that you won’t have any problems with your Chapter 7 bankruptcy filing.

There are two answers to your situation. One is by the book and the other is by reality. It is really all going to hinge on how the bankruptcy lawyer thinks they can present it and how tough the local bankruptcy court is.

If I was to guess, I think you’ll be fine, but follow my advice. If you need help to locate a bankruptcy attorney, click here.

Big Hug!

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • http://Website rangrrob

    This may sound appropriate if times were normal but mostly everyone is in some kind of financial trouble because of this financial crisis.These people are not the lucky ones that got bailed out.No their the victims of the Banks and financial institutions greed ,risky investments (can anyone say the word derivatives) and corruptive practices.

  • http://www.afford-bankruptcy.com/blog Benjamin Anosike, Ph.D.

    Lee: Sir, I would not characterize your particular or specific case or circumstance as I do not wish to be deemed or conceived as giving you (or any particular person) “legal advice” on this matter, or on any other. I will only make a general statement of what typically happens generally in legal terms in cases of such nature.

    Under the current bankruptcy law which was enacted in 2005, debts found or deemed to have been incurred by acts of fraud, false pretenses or misrepresentation, and debts or loans obtained by use of written statements which are materially false and deceitful regarding the debtor’s financial condition, are not DISCHARGEABLE in bankruptcy. That is, such particular debts will NOT be cancelled or forgiven in bankruptcy.

    And debts which fall within the following categories may generally be presumed to be fraudulent and therefore non-dischargeable, unless proven otherwise – debts over $500 that the debtor incurs for loans or credit card purchases or luxury items within 90 days of filing for bankruptcy; cash advances of $750 or more within 70 days of filing for bankruptcy; and any debts incurred when a debtor knew or should have known that he (or she) couldn’t pay. (The most common forms of this are: a credit card purchase, when the debtor knows, or reasonably ought to have known, that he won’t be able to pay; ‘adding up’ on credit card purchases at the last minute either just before filing for bankruptcy or after the card issuer has ordered return of the card, unreasonable or outrageous charge offs for obvious luxuries.)

    BUT THIS IS IMPORTANT: There are certain circumstances, however, when this kind of debts which ordinarily are Non-Dischargeable, may become DISCHAREABLE.

    Under Section 523(c) of the Bankruptcy Code, credit card debts (among others), which would ordinarily be non-dischargeable, would, nevertheless, be deemed dischargeable, and not non-dischargeable any more, if and where certain given conditions obtain. Namely, if this were to happen: if the creditor who’s owed the debt does not expressively mount a challenge in the bankruptcy court against their being discharged and then succeed in convincing the judge to hold that those debts are actually non-dischargeable. To put it another way, if a debtor has any non-dischargeable debts that fall within the above-stated kinds of debts, UNLESS the creditor himself (usually the lawyer he might have hired and handsomely paid to do this for him) had actually initiated a court action during the bankruptcy proceedings expressly demanding denial of a discharge for those debts for reasons of fraud or dishonesty, and UNLESS the bankruptcy court upholds such a complaint and makes an order declaring those debts to be actually non-dischargeable, then those debts would be deemed dischargeable and would be discharged, nevertheless.

    If the creditor to whom the debt is owed does not act at all, or fails to act on time (i.e., within 60 days of the first date set for the creditor’s meeting during bankruptcy), then the debt still remains discharged, providing the debtor had fully listed those debts as his debts on the bankruptcy petition papers. On the other hand, if the creditor should act timely, and if he should successfully raise an objection and make a good case to the court, the debtor would then not be discharged from such debts in such circumstance upon a ruling by the court to that effect.

    In deed, fortunately for the debtor, in most bankruptcy cases involving such issues, the history is that most creditors often never bother to raise any objections whatsoever in the cases, in the first place!

    Here is the point of vital importance here for debtors to recognize: as a practical matter, what generally happens in practice, is that most creditors who are owed such types of debts, would usually and generally not challenge or object to the discharge of such debts and thereby would let it readily pass. Creditors, quite conscious of the fact that mounting such a court challenge against the discharge of such a debt would usually require a lawyer, and, with it, the lawyer’s usual hefty costs, would deem it a better business bargain, comparatively speaking, to let the debt go, than to “throw good money after bad” by paying a lawyer what would probably be as higher amount to challenge the debt’s dischargeability. Meanings that debtors (or their attorneys, if they’re using one) would often file for bankruptcy and list those debts, any way,in the reasonable hope and expectation that the creditor(s) would not mount any challenge in the first place against their discharge.

  • Justin narin

    Debt consolidation is the best way to solve your debt problems & more importantly choosing the right kind of option plays a great role. For this you need experts advice & from my experience.

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