 Shelve
credit cards before filing bankruptcy
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 Dear
Bankruptcy Adviser,
My husband recently left me with a large debt with our business
and I have no choice to but to file bankruptcy (on behalf of the
business). He also left me with no income. I used my retirement
to set him up in business and he has embezzled money. I do plan
to file charges. I have no choice but to use my credit cards to
survive and keep my house and car as well as all household and personal
expenses while I try to find full-time employment. I am also disabled
and have no idea when or what type of work I can find or how long
it will take. Please tell me what I should NOT do with my credit
cards in the event that I am unable to work in the months ahead
and have to file personal bankruptcy. I am desperate for answers
because I do not understand the new laws concerning bankruptcy.
Please respond. I want to do the right thing. Thanks for your help.
-- Becky
 Dear
Becky,
Becky, if you read my other articles, you'll know that I only suggest
an attorney when it is absolutely necessary. You are in the "absolutely
necessary" category. Proceed directly to an attorney and lay
out the issues:
Can I protect my house in a bankruptcy?
If I cannot, what other options exist? Sell the property? Refinance
and pay off all the debt?
Just recently, a client hired me after filing a Chapter
7 bankruptcy. This is the type where she eliminates all her debt
and gets a fresh start. However, she didn't know that she had unexempt
equity in her house. Meaning, she could not protect her house if
she filed a Chapter 7 bankruptcy because she had too much equity
in it. She thought filing bankruptcy would be "easy" and
the only cost would be her bankruptcy filing fee. Only now the trustee
wants to, and can, seize her house to pay creditor claims. One conversation
with me and she would have saved many thousands of dollars.
Your situation requires the attention and assistance of an attorney.
If it feels like you don't have the money to hire an attorney, you
need to ask yourself if you can afford the consequences of a court
judgment against you: seizure of bank accounts and a lien on your
home.
Many attorneys provide free consultations. Get a
referral from a friend, if possible, because it's always good
to do a little homework. Regardless, when you meet an attorney
ask him or her some questions.
- Has he or she handled cases like this before?
- What does he or she anticipate this will cost, and how long
might it take?
The other difficult question you ask concerns credit
card use prior to filing bankruptcy. It never looks good to use
a credit card within a few months of filing bankruptcy. Even worse
is if you took out cash advances, purchased a new TV, or have simply
run up a lot of debt. Recent credit activity can raise the presumption
of abuse, and creditors may challenge your right to eliminate the
debt. Under the new law, it is easier for creditors to show this
presumption of abuse. If you decide bankruptcy is right for you
after meeting with an attorney, that attorney should advise you
to stop using the cards immediately.
Justin Harelik is a practicing bankruptcy lawyer
of counsel to Price Law Group in Los Angeles. To ask a question
of the Bankruptcy Adviser go to the "Ask
the Experts" page, and select "bankruptcy" as
the topic.
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