Bankruptcy

Should I Stop Paying My Credit Cards if I'm Going to File a Bankruptcy?

By Joseph McDaniel, Esq.

Don't do anything at all until you KNOW FOR SURE that you are going to be filing a bankruptcy, and about how long it will be before you qualify for the means test, and whether you need to wait for a year because of the $47,000 preferential transfer to the insider (Mom) you made prior to filing.

So before you even THINK about stopping payment on your credit cards, do the homework on my blog so you can start figuring out whether you are a candidate for filing in the nearish future, and if not, whether you'll need to wait six months (common waiting period for people who just lost a high-paying job and have no current income) or a year (if you made an insider preference and would rather Mom didn't get sued by your bankruptcy trustee) or four years (because of the huge fraudulent transfer you made to your brother).

The major reason I don't want you to stop making credit card payments before you consult with expert bankruptcy counsel is that the interest rate will go through the roof immediately, and over a period of six months there's about a 20% chance that one or two of your credit card creditors will sue you, depending on the amounts of the credit card balances and the specific internal policies of the credit card companies.

None of that is the end of the world, but I like my clients to have some idea of what's coming down the road prior to doing things that they can't easily reverse.

NOTE: don't get fired from your high paying job, and then pull the same amount of dough out of your retirement account to live on, and then expect to file immediately after you exhaust that account! Pulling dough out of your retirement account is going to count as "income" for purposes of means test analysis, and it can delay your filing just like the income from your job.

Once again, you need to know the effect of what you are planning on doing prior to pulling the trigger.

The sequence is ready, aim, fire! It is NOT ready, fire, aim!

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on June 02, 2010 (boomark / email).