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WALLSTREETESQ
WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 15993
Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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I just got divorced and had to give up all of my net worth

Customer Question

I just got divorced and had to give up all of my net worth to do so. My wife got $4 million and I got $20,000. In addition, I am obligated to pay $10,000 per month in alimony. My business, which had been making seven figures, just collapsed. And my lawyer told me I have no chance of getting an alimony reduction. I am now living in Nicaragua with my girlfriend, and so as a last chance to create some income, I have taken as much cash as I can out of my credit cards (about $150,000) to start a bar. At the last minute, the liquor license I have been counting on has fallen through. Not sure how I am going to make my alimony payments now. At least my girlfriend works as a teacher so I am not homeless.

So my question is, if I can't get this liquor license, can I go bankrupt on the $150,000 credit card debt?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  WALLSTREETESQ replied 1 year ago.

WALLSTREETESQ :

Hello I am a licensed attorney here to help you with your question, please review my response and do not hesitate to ask for clarification

WALLSTREETESQ :

It would be possible to go bankrupt on the credit card debt, however if the money was taken out within the last year, it may be suspect, I would consider filling a bankruptcy after one year, and claim the debt as a business debt, so you can discharge it without any issues,

Customer:

Well, right now I am broke. So if I don't pay on the credit cards, you are saying it is better to wait a year and when they call for the money just say I am hoping things will turn around, and then after about a year, file then?

WALLSTREETESQ :

Yes, if you do not pay, it would take 6-12 months if not longer for the creditors to sue you and obtain a judgment,

WALLSTREETESQ :

so you would have time,

WALLSTREETESQ :

If you file right after taking the money out it could seem as a fraud, and the Court may reject your application, after a year, and evidence that the business did not go through, it would be easier.

Customer:

I wasn't aware that credit card companies sue to get a judgemnet.

Customer:

Well, some of the money is for the bar, and some of it is for the alimony that I can't pay. If I wait a year saying I was using the credit card to pay the alimony too, hoping for things to do turn around, and then when they don't I file bankruptcy, is that allowable?

WALLSTREETESQ :

yes,

WALLSTREETESQ :

that would be better, also within a year you could try to reduce your alimony by showing you went bankrupt, that would be evidence of your financial distress

Customer:

Well, if I leave the bar out of it and just link the cash advance to the alimony, would that remove any appearance of fraud? In other words, I took all of the cash out because (in truth) they were offering a 0% interest for 16 months deal on all the credit cards when I took it out, then pay it out over a period of say 9 months, and at that time go bankrupt, would that make the bankruptcy easier as well as give me a better shot at alimony reduction?

WALLSTREETESQ :

It will help, but you will have to show that at the time you took out the debt, your intention was to pay the debt back,

WALLSTREETESQ :

It would be better to claim a business debt, stating you took the money to start a business, and the business loss caused you not to repay them

Customer:

What kind of evidence would help to show that?

WALLSTREETESQ :

proof that your past business no longer exists,

WALLSTREETESQ :

any efforts you made to start the Bar,

Customer:

Oh, I see, the idea is that I took out the money to start the bar, with the idea that the bar would be successful, and with the proceeds I would be able to pay off the debt.

Customer:

So it would have been reasonable when I took out the money that I would be able to repay the debt evenutally.

Customer:

I wasn't aware that they ask for explanations when you go bankrupt. I thought they just ask about your assets, income, debt, etc.

WALLSTREETESQ :

when their is high debt, the trustee wants to make sure you did not use the money for yourself, and filed bankruptcy to avoid paying the creditor, so a time delay and evidence for the use is needed

Customer:

Also, by the time I file bankruptcy, I will have been living out of the U.S. for over a year. My understanding is that a locus in the U.S. is needed to file bankruptcy. I have a U.S. checking account, registered to a Florida address. I file my taxes from that same Florida address. So I could file bankruptcy in Florida?

WALLSTREETESQ :

Yes, FL could be your place of jursdiction,

Customer:

So I don't have to show that I own a house or am paying rent in Florida, just that this is my legal U.S. address (based on my taxes and where my bank account is registered)?

WALLSTREETESQ :

a residence would be asked for, but if you can show you have an address in FL and paid taxes with a license to show the residence, you can show FL residence, a rental or something would help as well.

Customer:

What do you mean a license to show the residence?

WALLSTREETESQ :

a drivers license, the trustee will ask for forms of ID, a drivers license and social security number to prove residence

Customer:

Well, that's easy enough, because my driver's license goes to the same Florida P.O. Box that my credit card statements go to. So will that be enough to establish residency?

WALLSTREETESQ :

It should be enough,

WALLSTREETESQ :

A PO box is not great, but it will be enough to show you are a resident of FL,.

Customer:

And that fact that I am physically living in Nicaragua will not be held against me?

Customer:

One other perspective. What if I am unable to pay and don't declare bankruptcy? What would happen then?

WALLSTREETESQ :

If they think you have abandoned your residency it could be an issue, you will have to keep ties to FL,

WALLSTREETESQ :

If you cannot pay the creditor would have to find you and try to enforce a judgment, which would be difficult, since you do not live in the US.

Customer:

Because I would have to be served in person?

Customer:

I know if I don't pay my alimony, a warrant can be issued for my arrest for contempt of court. Do I face a similar danger relative to credit card debt?

WALLSTREETESQ :

yES,

WALLSTREETESQ :

No,

WALLSTREETESQ :

their would be no risk of jail time, if they cannot serve you fro credit card debt

Customer:

Now, if I don't pay and do nothing, don't declare bankruptcy, what would the process be from the credit card perspective? Would they just write the debt off after a certain period of time?

WALLSTREETESQ :

They would write off the debt, and try to sue you for a judgment,

WALLSTREETESQ :

if they obtain a judgment they will try to collect,

Customer:

Let's say they obtain a judgement. Could that judgement be discharged in bankruptcy at some later date?

Customer:

Or must the debt be discharged in bankruptcy prior to the judgment being obtained?

WALLSTREETESQ :

The judgment can be discharged at anytime

Customer:

So in terms of the whole fraud thing, and since I am living outside the U.S. anyway, with no assets in the U.S., would the lower risk option be to do nothing, and only declare bankruptcy if I decide at some later date (possibly in a few years) that I want to?

WALLSTREETESQ :

I would not pay your debts,

WALLSTREETESQ :

and see if they collect on you,

WALLSTREETESQ :

it would be difficult if not impossible,

WALLSTREETESQ :

if you intend on living in the US in the future, consider a bankruptcy at that point

Customer:

Is it also possible that they would simply write the debt off without going to court to seek a judgment? The only address they have for me is a P.O. Box, and if they call to harass me and I let them know I have left the country, is it possible they will just give up?

WALLSTREETESQ :

Yes, but typically they sell the debt to a collection agency and the agency will try to enforce or they will settle for 10-20%

WALLSTREETESQ :

I would not tell them anything,

Customer:

And the idea is that in years, if I want to declare bankruptcy, my creditors would be the collection agencies?

WALLSTREETESQ :

That is not important,

WALLSTREETESQ :

the debt would be discahrged either way, most collection agencies will not attempt an international collection effort.

Customer:

So to summarize our conversation, my lowest risk course of action, given my situation, would be to do absolutely nothing. And only if at some point I decide I want to, (possibly years down the road), initiate a bankruptcy?

WALLSTREETESQ :

Yes, that would be a good option,

Customer:

Thanks very much for your help.

WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 15993
Experience: 14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
WALLSTREETESQ and 5 other Bankruptcy Law Specialists are ready to help you

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