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Phillips Esq.
Phillips Esq., Attorney-at-Law
Category: Bankruptcy Law
Satisfied Customers: 19285
Experience:  B.A.; M.B.A.; J.D.
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Im a sole-proprietor and have $131K in unsecured cc debt with

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I’m a sole-proprietor and have $131K in unsecured cc debt with Amex, BofA & Chase. I had trouble paying them a year and a half ago, so they closed the accounts and set me up on a 60 mo payment plan with little or no interest (I think this was part of the Obama plan. The banks were required to do this when I had trouble paying them a year and a half ago). The payments pull automatically each month from my business checking acct, and they total $3200/mo.

This winter is going to be tougher for me financially and if I’m going to be able to make it without declaring BK I need to stop making those payments.

I’d need to stop from November through April, that’s when my cash flow is going to disappear, then resume May 1. If the banks get nasty and say no, I’ll have to declare BK. Because I have another $200K in secured debt and nothing close to that amount in assets, they’ll get nothing.

How best do I approach this? Do I stop making the payments then talk to them, or vice-versa? It seems logical that they’ll have no problem with this because they’d rather be paid than not. But I’d like some guidance. How do I best approach this and what can I expect from them? Thank you.
Submitted: 6 years ago.
Category: Bankruptcy Law
Expert:  Phillips Esq. replied 6 years ago.

 

I'm a sole-proprietor and have $131K in unsecured cc debt with Amex, BofA & Chase. I had trouble paying them a year and a half ago, so they closed the accounts and set me up on a 60 mo payment plan with little or no interest (I think this was part of the Obama plan. The banks were required to do this when I had trouble paying them a year and a half ago). The payments pull automatically each month from my business checking acct, and they total $3200/mo. This winter is going to be tougher for me financially and if I'm going to be able to make it without declaring BK I need to stop making those payments. I'd need to stop from November through April, that's when my cash flow is going to disappear, then resume May 1. If the banks get nasty and say no, I'll have to declare BK. Because I have another $200K in secured debt and nothing close to that amount in assets, they'll get nothing. How best do I approach this? Do I stop making the payments then talk to them, or vice-versa? It seems logical that they'll have no problem with this because they'd rather be paid than not. But I'd like some guidance. How do I best approach this and what can I expect from them? Thank you.

 

Response: You are giving your creditors and debt collectors way too much credit. They are not going to care if your business is making money or not making money so long as they are doing automatic debits to your account every month and they would continue to do those debits if even if the debits cause your bank account to be overdrawn. If you are not really going to afford the payments between November to April, then the first thing you should do is to cancel the automatic debits to your account. Otherwise, you would run into the problem of overdrawing the account come November when you would not have any money for the debits. Second, you should let them know that you can no longer afford to make payments due to your cash flow and for the collection of payments be suspended until May 2011. They are not going to go for this. However, it is worth making the offer to show that you have tried so hard not to file bankruptcy and that your creditors did not cooperate. Third, you would let them know that if they do not agree to suspend their collection efforts that you would have no choice but to file for bankruptcy protection and at that time they would get nothing. It is up to them. As previously stated, I do not expect them to go along with your offer. You would undoubtedly get collection calls and letters from them once you cancel the automatic debits to your account.

 

Customer: replied 6 years ago.
I don't care about collection calls and letters. All I'm concerned about is whether they're going to take me to court for the money rather than waiting six months for the payments to resume, which since they set them up fifteen months ago I've been flawless in paying.

 

I'll stop the automatic payments on November 1. But if I'm promising they're going to get paid starting May 1, and I'm willing to show them my P&L, my assets and what I owe my secured creditors, essentially showing them that I truly will go broke/declare BK if I don't put them off until May 1, are you telling me they'll take me to court for their money knowing for certain that it will push me into BK and they will get nothing? Rather than getting paid the full amount starting May 1? I've been told they're not that stupid, that they want their money.

Expert:  Phillips Esq. replied 6 years ago.

I don't care about collection calls and letters. All I'm concerned about is whether they're going to take me to court for the money rather than waiting six months for the payments to resume, which since they set them up fifteen months ago I've been flawless in paying.

 

Response 1: They may take you to Court. However, it is not a guarantee that they would. They may just hold off and see what happens in 6 months before they turn over the account to a law firm to file a lawsuit. They would check in on you from time to time to inquire about payment.

 

I'll stop the automatic payments on November 1. But if I'm promising they're going to get paid starting May 1, and I'm willing to show them my P&L, my assets and what I owe my secured creditors, essentially showing them that I truly will go broke/declare BK if I don't put them off until May 1, are you telling me they'll take me to court for their money knowing for certain that it will push me into BK and they will get nothing? Rather than getting paid the full amount starting May 1? I've been told they're not that stupid, that they want their money.

 

Response 2: Yes, they may take you to Court. However, they may also hold off on suing you and keep checking up on you from time to time for the status of your cash flow and to ensure that the payment would indeed resume in May.



Edited by AttorneyPhillips on 9/9/2010 at 3:59 PM EST
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