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Ask WALLSTREETESQ Your Own Question
Category: Bankruptcy Law
Satisfied Customers: 17252
Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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My wife and I owe more money than she earns. We have already

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My wife and I owe more money than she earns. We have already consulted a local BK attorney but I still have a remaining 2-part question that needs to be answered.

We currently have two vehicle leases that are expensive and we would like to turn them back in, with our "planned" chapter 13 filing. Our BK attorney has instructed us to go out and lease an inexpensive car "right now" before our credit gets ruined, and then we can still turn in our two expensive cars when we file chapter 7. Is this possible to do? Wouldn't a BK judge see that as some kind of "scam" by us? We live in California, so we definitely would still need a vehicle.

Also, my wife learned on Friday that she may be getting "fired" due to a paperwork error she made over 2 yrs ago! Her employer is pulling out all of their trump cards to get rid of highly paid executives at her company these days. Would we be able to file immediate BK and not have to wait 120 days because we have been using our credit cards???

the attorney is correct, you should try to get a lease or or purchase a car with large financing now, it is not a fraud, if you are using the credit cards debts for non luxury goods you can file ASAP, but it is better to wait atleast 90 days to file, as if you stop paying your bills now, they would not be able to collect for some time. If she does lose her job, you may be able to file a chapter 7 which would be better.



Bankruptcy Code Section 523 addresses this situation. Section 523(a)(2) provides that:

consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and

cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable

Edited by k. paturi on 3/1/2010 at 3:28 PM EST
Customer: replied 7 years ago.
If my wife were to resign instead of letting them "fire" would that effect our BK filing? We were scheduled to file in May so that 120 days will have passed since either of us had used our credit cards for anything. But after learning she may be getting fired this past Friday, we would not have any money at all to pay our monthly responsibilities. So, wouldn't the entire 120, or 90 days rule be tossed out the window in light of her being unexpectedly "fired"? But she wanted to "resign" to save her 20 yr reputation when she goes looking for her next job! If she were to "resign" me that may seem insane to a BK judge? A woman making good money quits her job and owes thousands???
Please let me know what you think.
the Court does not look into it, they really do not care what they want to see is your income, resigining from a job may be worse than being fired, as the Court may state that you did this to avoid filing a chapter 13. If she wants to resign for future job positions, that is a good idea and she should consider this, but the Trustees of the Court could care less.
Customer: replied 7 years ago.
I intend to accept your answers and compensate you, but if you don't mind me asking once more for clarification purposes, if my wife resigns and then we submit a chapter 7 filing, in your professional opinion, the BK courts will not look upon her resignation as some kind of dumb ploy to go bankrupt? I guess what I am getting at here is, she has worked for one large US Company for 20+ yrs. She made an error in judgement 2 yrs ago by signing a document so a subordinate employee under her charge could obtain a home loan. Now that document has resurfaced and her HR dept. is coming after my wife! She believes, she will be fired by the end of this week! She asked me "should she resign"...and I am asking you if she does can we then file Chapter 7 immediately? Since we won't have any money to pay any creditors at all, house payment, cars, bills etc. How long in your opinion would we be able to remain in our home if we stopped paying the mortgage?

she should resign so she does not have a bad employment history,m but she cannot file immediatley the court will want to see the last 6 month average salary for the means test, she would have to wait atleast 3-6 months to file after the firing to get the income lower. In Ca, it could take 9-12 months for the bank to actually begin evictio procedures, first if you have been current on your bills and stop paying them now, in three four months will these creditors start trying to collect, and then they have to sue you first which takes time.

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