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WALLSTREETESQ
WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 17080
Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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Hi, I recently went back to school (last year) and have about

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Hi, I recently went back to school (last year) and have about $4000 that I took out of an Ira for school if I pay that
towards a deferred student loan before bankruptcy, would that be
considered fraud? Also, i can no longer work full time because my job
will no longer be able to be flexible enough for classes. The jobs
I'll need to take are far lower salaried than my current job. Will
that be a problem for bankruptcy processing?

Thanks,
Tad Hammer

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 clarificati on

WALLSTREETESQ :

This is a common situation,

WALLSTREETESQ :

if you are not trying to discharge the student loans, it will not be fraud,

WALLSTREETESQ :

the IRA by itself is exempted from bankruptcy so that money is protected either way,

WALLSTREETESQ :

I do not see any issue of fraud here.

WALLSTREETESQ :

Since you are using the money to pay a secured creditor, it should not be an issue,

Customer: Ok, I didn't realize one could discharge federal student loans. Since I'll need to use credit cards for some living expenses between jobs for a bit longer at what point will the debt be able to be discharged vs paid back? Nothing luxurious just food, electric, etc.
WALLSTREETESQ :

You should not use any credit cards if you plan on filing a bankruptcy within the next 6 months, if you are using the credit cards, do not file for atleat 6 months if not a year to avoid any fraud issues, you cannot use them if you intend to discharge them in bankruptcy.

WALLSTREETESQ :

Also, student loans can only be discharged if you can show an undue hardship,

WALLSTREETESQ :

which is that in the future you will have no way to pay them back, due to some unforseen event, such as a medical injury or disability

Customer: Ah, ok. I was told that bankruptcy needed to be filed before foreclosure so I'm worried about timing. Would it be better to use the Ira money for living expenses vs loan repay?
WALLSTREETESQ :

You should not use the IRA now for any reason,

WALLSTREETESQ :

if possible,

WALLSTREETESQ :

an IRA is protected in a bankruptcy, so you can use it afterwards,

WALLSTREETESQ :

if you will be filing for bankruptcy in the future,

WALLSTREETESQ :

stop paying all creditors now,

WALLSTREETESQ :

and file to stop the foreclosure,

WALLSTREETESQ :

and if you paid any creditors over $600

Customer: Ok, but I'll need to wait 6 months for credit cards, right?
WALLSTREETESQ :

the trustee could force them to return the money

WALLSTREETESQ :

it is possible,

WALLSTREETESQ :

but if their is a sale date, you have no choice but to file,

Customer: I Have paid mortgages to date but have to quit job in late April. Is foreclosure relatively quick? I'm concerned about fraud on the cc's and not being able to pay mortgage in the meantime. I understand that timing is important.
WALLSTREETESQ :

if you have paid your mortgage, and will stop in April you will have several months to file,

WALLSTREETESQ :

it will take a few months for such foreclosure action to start, and you can file

WALLSTREETESQ :

at anytime before an actual sale date to stop a foreclosure,

WALLSTREETESQ :

so stop paying or using the credit cards,

WALLSTREETESQ :

and file in a few months,

Customer: Ok, so if i do that, by that time it goes through the cc spending won't be considered fraud?
WALLSTREETESQ :

do not use the credit cards, if anything use the IRA funds to pay for living expenses, besides credit cards and the mortgage

WALLSTREETESQ :

this way you can file and stop the foreclosure and discharge the debts,

Customer: I won't be able to afford the house so I intend on giving it up. Does that change anything?
WALLSTREETESQ :

no,

WALLSTREETESQ :

so if that is the case, let it foreclose,

WALLSTREETESQ :

their is no time pressure to file,

Customer: Ok, in that case would it be better on my credit to try to pay cc's and 2nd mortgage (will be very difficult) or just let the house go and stop paying everything and go bankrupt at the 6th month point?
WALLSTREETESQ :

I would not pay anything,

WALLSTREETESQ :

in term so of credit scores, it will help if you pay everything, but if you know you cannot afford it,

WALLSTREETESQ :

that will only hurt you,

WALLSTREETESQ :

once you file bankruptcy you will have no more debt or payments due,

WALLSTREETESQ :

and your score will increase within a year

Customer: This would be ch 7 correct?
WALLSTREETESQ :

yes

Customer: Is that something I could submit myself relatively easily?
WALLSTREETESQ :

It is best with an attorney, but you can do it yourself, or hire a paralegal service to help you

Customer: Thank you. This is a scary process and never thought I'd be here. I appreciate the information.
WALLSTREETESQ :

Good luck, and if you have any further questions please do not hesitate to ask.

WALLSTREETESQ :

If satisfied please provide us with positive feedback.

Customer: Thanks.
WALLSTREETESQ :

thank you,

WALLSTREETESQ :

If satisfied please provide us with positive feedback.

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