Bankrupcty questions
 

One of my friends intends to apply for credit cards and lie about his income on the application to get a higher limit. Then he intends to max the cards out and file bankruptcy.

I told him I think he will go to jail, he thinks he will just lose everythign he owns.


Who is right?

Bankruptcy won't relieve him of all the debt in most cases.

People believe bankruptcy means you don't have to pay it back. Thats not entirely true.

Best he looks into the bankruptcy laws before he tries to defraud the credit card companies. He can fuck himself big time.

sounds like a stupid plan

The bankruptcy officer appointed and the credit card companies may check how he got such credit limits etc then l guess he will be done for fraud ..that would be my guess :(

He won't go to jail but his credit will be screwed for seven years after discharge and if there is intent to defraud chapter 7 is not an option. :upsidedow

Very stupid..his credit will be fucked for years and it will always be on your credit report

If he lies about his icome he can get in trouble

There is a new law that is going to be passed by Congress within the next month or so. It was on CNN today and it looks like nothing will get in its way of passing. Bush has also said he will sign it. With this new law about 95% of the people that now file for bankruptcy will no longer have their assets sold and the slate wiped clean. They will put into payment plans to pay off the debt.

Also, cc companies verify income. They don't just take your word on it.

im guessing this friend of yours is young, basically his understanding of the process is very partial

you do infact have to pay back the debt, and after a bankrupcy, your credit is pretty much fucked for a few years

"A friend"? ;)

Not if he obtain credit on the internet....typos just like you spelled income :)

He will not go to jail, you don't have to pay back loans or credit cards, they just come and repo all your shit. Then they submit your debt to collection companies which in turn screw your credit for 7 years and for that 7 years you better have a lot of cash to pay for all your shit!

He might as well take advantage *assuming* he has little to lose anyways.

With that said, lying about income won't help much if he has little to no credit history ... because if so, the primary purpose of the income question will be to determine if he should be offered a regular credit card or offered a secured credit card / declined.

If he really wants to take advantage, he should be somewhat honest (most folks fudge their income up a little) about his income and get the card(s); income less than $20K will likely disqualify him; he should apply for only one or two cards at most to start with, and then perhaps add one or two more several months later.

The key for him to get lots of credit is to build trust - use the credit card(s) a little, then a little more, and so on over say a year - if he does it right, and some luck helps, the credit card issuer(s) will regularly raise his credit limit and even better, offer him convenience checks - allowing him to get hard cash quickly, often way in excess of any "cash advance" limits.

In a nutshell, your friend will likely need to spend many months or more using the card(s) to get decent credit limits - and needs to do all of this in less than six months - that's likely when the new bankruptcy law will take effect.

While on that ... the new bankruptcy law in simplistic terms essentially changes most all credit card debt from being "unsecured" to "secured" *in a matter of speaking*.

Many folks will be shocked to learn the power the card companies will soon have under the new bankrupcy law - millions of folks will be trapped and will lose most everything; from an ethical standpoint, your friend shouldn't take advantage, but on the other-hand, the credit card companies, collectively, are scum (changing rates any time, legal usury [some have rates upwards of 40%! - there's no limit and they could make it 1000% anytime!], forced arbitration/one-sided legal agreements, etc) - he'd likely do better to put more effort into earning money than trying to rip off the credit card companies, but anyways I certainly can't blame him if that's the path he chooses.

Ron

He is 25, owns nothing, and doesnt care about his credit. His theory is everyone who is in debt or owns nothing should do this. I told him unfortunately I own something LOL.


Thanks to those that know some detail/hardfacts.

I told him if it works he should put it all on a roulette wheel LOL.

In Canada a judge won't relieve the bankrupt of any debt that has been 'racked up' prior to the application for bankrupcy. I'm sure it's similar in the US as well.

He will pay in the long run, and most likely the price will not be worth it.

:thumbsup :thumbsup :thumbsup :thumbsup :thumbsup

right on man

Very dumb on several levels.

Under the current system:

1. If he lied to obtain the credit, the debt is not dischargeable as it is considered fraud.
2. Even if the credit card companies, don?t bring the fraud issue up when the trustee sees that most of the debt is recent credit card debt he/she will file a 707b motion booting your friend out of bankruptcy and into state courts for collection.
3. Assuming he buys things with the credit cards he won?t get to keep the stuff. For example the upper cap on personal assets you can keep in my state is $7,500 for a single person. That includes any equity you have in a car plus your personal effects.

Under the new system:

He will be considered and treated as an indentured servant. The bankruptcy trustee will take his paycheck and distribute it to his creditors until they are paid off in full or five years passes.

Stupid idea on many levels as has already been stated. One thing that hasn't been said, however, is that he wouldn't have to declare bankruptcy in most cases. Usually you can negotiate with the banks and discharge your debt with as little as 10-25 cents on the dollar. Banks don't really want to go through the trouble of chasing you around and paying to go to court etc. More often than not they will settle a debt if approached properly. After all, some money is better than no money.

I've been thinking about this new bill they're trying to pass, and considering the timing and effect it'll have on homeowners.

Right now there's a real estate bubble. Estimates vary (and markets differ) but the general consensus is that prices are very high because capital is easy to come by. With insanely low interest rates, many people have purchased second homes as a means of revenue generation on speculation of ever-growing land prices. Of course, we all know what happened the last time a market grew heavily using borrowed money on speculation of limitless growth... rightly so, the phrase 'new economy' should strike fear into the heart of anyone who was vested in the market at the time, and it looks like history is rhyming with real estate.

Which is why the timing of this bill is ominous. The short/long term yield curve has been flattening quite quickly of late, as greenspan pushes up interest rates in an attempt to ward off inflation (which hasn't been terribly successful, considering they just announced 3.6% for base inflation at the end of last week, and that doesn't include fuel price increases which would push REAL inflation to over 5%). When the yield curve inverts, it's a sure sign of an oncoming recession, and all the ills that go with it (stagflation, anyone?)

This would be absolutely brutal to anyone who bought in with money borrowed at floating rates... interest rates go up and suddenly they're servicing debt at much higher levels than when they bought in. It'll wipe out the people who're already marginal at the lower rates first, putting that land on the market at bargain prices to try to limit liability (or as part of foreclosure), and the people who have the cash to keep paying will see their property values erode as the market gets cooler and cooler. Speculative buyers will be particularly hard hit, as that 'constant march forward' is what they were banking on.

Now when you have a scenario like this, you're going to see a lot of debt. More out of control debt, in fact, as rates go up... and with debt comes bankruptcy, often with heavy CC debt as the people in debt try desperately to maintain lifestyle using whatever credit sources are available when they realize that they can't even sell their house(s) to cover the amounts they owe. This bill will ensure that they, basically, will not only end up with tantamount to nothing, but that people who got lured into the trap of easy credit will be the indentured servants of creditors for a number of years to come. They may never overcome the debt cycle, and I have a suspicion that is the situation the credit issuers actually anticipate and desire.

The cynical among you may want to seriously consider investing in companies that specialize in antidepression medication (pfizer) or funerary services. With crushing debt comes suicidal / homocidal thoughts in its wake. :2 cents:

Oh, and tell your friend that he's a jackass if he's actually TRYING to get into this cycle of woe intentionally. He'd be better off sawing off his legs and begging for coins on the street corner.

bwahahahahahaha, tell him to do it and buy a one way ticket the fuck outta there to a country that wont extradite him cause he's fucked if he does it! :P

That isn?t at all how it works nowadays. If your low income (under the garnishment threshold) after 2-3 years of chasing you around they might offer to settle for 2/3s and on real rare occasions they might take ½ of the debt owed. If you make more than the garnishment threshold, they will simply garnish your wages. In those cases there is no need for them to take less than what is owed.

And under the new system there is no reason for them to negotiate whatsoever as they will likely be able to collect in full (even the interest) and the government will pay all of the collection cost. Being a credit card issuer has to be one of the most lucrative business to be in nowadays because in effect the government is guaranteeing collection of the debt.

Your friend is basically a complete moran. Best case scenario, he drives an ok car (probably not going to be a BMW or Benz) for a few years before he's over his head and the repo man shows up. He goes bankrupt and gets to drive a car he paid for in cash for the next 7 years!

And with the new law its going to look a lot uglier than that...

Just an FYI if anyone out there is thinking there is a chance they might not make it the next couple of years go ahead and file chapter 7 now while you still can. Even if you think it is only a 20% chance you won?t make it the new system is so bad it would be worse than being sent to prison.

Under the new bankruptcy law, is there a time limit to how long one can be forced to pay back their debts?

I see 5 years mentioned a few places, but I think that's part of the "means" test and *not* a time limit on how long one can be required to pay back creditors - my impression is that there is no time limit - one could be forced to make payments for the rest of their life under the new bankruptcy law ... ?

Ron

That isn?t part of the means test. 5 years will be the presumptive repayment period under the new Chapter 13 provisions.

After 5 years the creditors get whatever they are going to get, and your remaining non-secured debt is discharged. However that isn?t as good as it sounds. Even Chapter 13 plans under today?s more liberal rules fail in 80% of filed cases.

In a nutshell here is how it works:

1. You file Chapter 13
2. Your fill out a budget of your income and basic living expenses: rent, utilities, transportation ect.
3. Your attorney prepares a Chapter 13 repayment plant based on these expenses and your income
4. All money you make in excess of your basic living expenses goes to pay your creditors for the next 5 years. (you have no disposable income)


The real knock on Chapter 13 is that the budgets don?t allow for changing circumstances. For example say your plan calls for you to pay $1,000 a month to your creditors for the next 5 years based on your current income. If you loose your job two months into the plan it is tough shit for you as you still have to pay the $1,000 a month you agreed to. The same goes for if you get sick, get divorced, essentially anything that comes up it doesn?t matter you still have to pay the $1k per-month for the next 5 years. What inevitably ends up happing (even under current chapter 13) is some unexpected expense or unforeseen circumstance comes up and the debtor doesn?t make the required payment. The Chapter 13 Bankruptcy case is dismissed and the creditors go after them in state court leaving as their only option to file chapter 13 again using their new income/expense numbers. So in that sense it can be a never ending cycle. I?ll also point out with chapter 13 your bankruptcy isn?t over until you finish with your repayment plan. So if you?re forced into Chapter 13 you can?t start rebuilding your credit for 5 years as opposed to Chapter 7 where you can immediately begin to rebuild your credit.

I seem to recall hearing something about increased difficulty getting qualified under certain chapters, that some were more protective than others for private citizens and those were being pinched off/made more onerous to prove eligibility... I've long since lost that reference. What do you make of it?

If you are worried about losing your home and can pay your mortgage but not your other debts you need to live in FL. If you own a home in FL and file the homestead papers FL law protects your home from being sold to pay off your debts unless it is is the mortgage company foreclosing because you didnt pay them. So basically you pay the mortgage and not your other bills. I think there are a few other states like this.

He sounds like a dick. Scum like that drives up fees and interest rates that are charged to everyone.

Not worth it at all.... tell him to get a job and pay for everything like the rest of us. Sorry to be an ass here, but shit like this pisses me off. Wastes tax dollars processing/sending this stuff to trial for those of us that work 60 hours a week for our money.

Credit card sucks.

with that new law that will be passing, filing bankruptcy will be much harder

It is chapter 7 that is being cut off. That is where.

1. Your attorney files the paperwork
2. You go to a short meeting
3. You get something in the mail a few weeks later that says you?re discharged

You don?t have to make any payments with this system. If you do have too many assets the court liquidates them and sells them to pay the creditors. 90% of people filing chapter 7 case have their cased deemed a ?No Asset Case? when they go to that short meeting I described in #2. This means there are no assets for the trustee to give to the creditors, and the case for all practical purposes is over. So it is a much better system for the debtor. The other chapters are mainly for business, and there is a special chapter for family farmers.

Tell him to get off the pipe and back get back to school... :pimp

well if you pull something like that in europe youre history :)

credit cards are the devil...he is absolutley an idiot if he goes thru with his plan, only gonna hurt him in the long run...jmo

There seems to be a lot of differeing opinions but no matter who I listen to it seems like his plan will work because:
1. he never has a legal job where he pays taxes
2. he wasnt goign to buy things with the money he was going to hide it

so regardless of who I listen to it looks like he will actually be fine (within the realm of his fucked up lifestyle) if he does it before they change the laws.