IF you are in debt and don’t have enough to pay your debts each month after taking care of living expenses, you may be tempted to borrow money from credit cards to pay your other debts. At first blush, it may seem like a “brilliant” idea. Don’t do it. If you do, you are playing a game you’re certain to lose. It’s only a matter of time before you would realize how foolish this “brilliant” idea actually is.
Eventually, if you do end up filing for bankruptcy later, it also possible that creditors will object to your discharge on the grounds that you used the creditors’ money with no intention to repay. The intention may be inferred from the fact that you were using your credit cards right prior to bankruptcy filing at a time that you knew (or at least had reason to know) that once your credit cards are charged up, you won’t be able to pay back the money that you used and that you would have to file for bankruptcy to discharge what you owe.
This is quite common in bankruptcy practice as most people are not aware of the fact that it is not a good idea to have a lot of large pre-filing cash advances and charges if Bankruptcy is the route one is left to take. In some cases, you may end up having to pay your creditors back if they get a judgment against you in bankruptcy court. Of course, I am speaking in general terms and that there may be facts unique to every case which would result in a different analysis. But the point is, using your credit cards right prior to bankruptcy filing may give creditors a reason and a basis to object and thus this would defeat your purpose in filing.
Borrowing to pay back other debts is like digging a hole that gets deeper and deeper. It’s only a matter of time before you can’t get out. Well, you say, “How about getting a debt consolidation loan? Wouldn’t that solve all my debt problems if I could consolidate all my debts into just one loan?”
First of all, the interest on a debt consolidation loan is usually high especially if you’re credit is not that good. Secondly, banks that give out debt consolidation loans will usually ask for collateral to secure the loan. If you are a homeowner and there is sufficient equity in your property to protect the creditor’s interest, you may qualify if you are willing to give the bank a trust deed on your property. If you do this, however, make sure that you’re not just acquiring another debt you won’t be able to pay.
The best type of debt consolidation you will ever find is the kind of debt consolidation that federal bankruptcy law allows for individuals who are eligible (Chapter 13). What is Chapter 13? Chapter 13 is the section of the Bankruptcy Code that allows you to reorganize your finances when debts have become unmanageable. For instance, if you can’t afford to even make the minimum payments on your credit cards, you may consolidate all your debts into one affordable monthly payment.
In Chapter 13, your monthly payment is generally determined by the amount of your surplus income each month after living expenses are paid. If you have “regular income” from any source such as employment, pension, social security or even family contributions, you may be eligible for a Chapter 13 debt consolidation. Depending on your income, you can get completely out of debt in only 3 years unless the plan requires a longer term (up to 5 years) in order to be approved. In most cases, it is possible to cut your monthly debt payments in half or even less.
The interest on credit card debts is reduced to zero in Chapter 13. Thus, all your payments go towards the principal amount owed. Compare this with the 23-29 percent interest you’re paying on your credit cards. I’m sure you realize that if you are only making the minimum credit card payments, it will take you forever to pay off your debts! Chapter 13 also has certain benefits which space won’t allow me to discuss here. Some of these benefits include stopping a foreclosure to save your property, stopping a car repossession, paying back delinquent IRS, State and property taxes, and consolidating student loans.
If you have to borrow each month to pay other debts, this is a danger signal that you shouldn’t ignore. Take action before the problem gets worse. Your property, your wages and your financial future may be at risk! If you want to find out what your legal options are, call my office at TOLL FREE 1-866-477-7772 to schedule a personal consultation. Whether you need debt elimination or debt consolidation, there are remedies available under the law if you qualify. For your convenience, we have offices in Glendale, Cerritos and Valencia.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped thousands of clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1 (866) 477-7772.