pre BK questions/cash I'm holding

[supergivingmom]

What is the name of your state? Illinois

I am deep in debt. Soon, I will be having minor surg. and undergo medical tests due to illness. I am not behind on a single CC but cannot go through the month without charging again after I've made my payments. I anticipate I may need to file BK before end of 2004 as I cannot continue to juggle my finances, let alone become debt free by paying them off.

I recently withdrew money from my 401K and had a Christmas bonus. I paid off as much as I could of my small balance creditors and will use what's left to subsidize my income till I make my final decision on filing BK. I have quit using the CC's. This cash reserve is $4,000 and in daughter's ckg. acct. I am trying to plan ahead so if I file BK, it can be CH7 and I will have as few complications as possible with the court system.

I rent my apt., and have no assets. I am 60 yrs. old and stressed about trying to plan retirement with this much debt. I only have $14,000 left in my 401K at work.

Debts are:
* 8 CC's with a total balance of: $20,000
* Student Loan (not dischargeable, I know) 4,000
* Car Loan (value 5800) Balance I owe:>>> 7,300
(I want to keep the car and will reaffirm.)
* Best Buy account (purchases at Christmas) 2,500
* My Credit Union Visa account 3,700

My questions have to do with the Best Buy & Credit Union Visa Card accounts.

Best Buy is in my name, for my son's items, purchased at Christmas. Terms of 18 mos/same as cash, no interest. He is making payments direct to Best Buy each month. We are willing to reaffirm these in order to keep these two items he purchased.

Credit Union is for a Visa CC. Nothing secured like a car or anything like that.

QUESITONS:

1) Should I use some of my $4,000 reserve to pay off Best Buy & have my son pay me monthly payments instead. He doesn't want to lose his purchases & I don't want to have to file ch. 13 just because of that account and wanting to keep 2 items.

2) What is cross-collaterization when it comes to credit unions? I've read info but am confused. Is there something I should be looking for in the fine print from when I opened the account? If necessary, I could use my reserve to pay them in full, wait longer to file, keep using the CC's to get by and include Best Buy in the BK and reaffirm my son's purchases. Would that work, and if so, could it still be CH7?

If I were younger, I'd tough this out and pay off everyone. But I
can't handle it anymore. I know I need to wait to file till I know my health problems are done or at least stable.

Comments and guidance are welcome. Thanks in advance.

 

[Ladynred]

1) Should I use some of my $4,000 reserve to pay off Best Buy & have my son pay me monthly payments instead. He doesn't want to lose his purchases & I don't want to have to file ch. 13 just because of that account and wanting to keep 2 items.

*** Quite frankly, I'd have to say no. You need to quit using credit cards completely, and using what little you have for living expenses, NOT credit cards, is what you should be doing. Its far more important to take care of yourself than it is to pay on credit cards.

NOT reaffirming BestBuy would likley NOT force you into Ch 13 at all. BestBuy retains a security interest in what you buy, as I guess you know. You do NOT have to reaffirm to keep the items, but as long as they keep gettin' paid, they will be happy. Reaffirmations, in many states, have to be approved by the BK court, so there's always the possibility a BK judge won't approve it anyway.

2) What is cross-collaterization when it comes to credit unions? I've read info but am confused. Is there something I should be looking for in the fine print from when I opened the account? If necessary, I could use my reserve to pay them in full, wait longer to file, keep using the CC's to get by and include Best Buy in the BK and reaffirm my son's purchases. Would that work, and if so, could it still be CH7?

**** If all you have is a visa card, then the cross-collateralization may not come into play. What you need to do is look at the agreements for that card, or anything else you've signed with the credit union. Cross-collateralization means, basically, that even if you only ever have ONE loan with them with collateral given as security, they can use that collateral as security for ANY other loan (and maybe the Visa) that you EVER have with them. This is a somewhat sneaky trick to keep people from having debts to credit unions discharged by forever claiming a security interest.

Check the terms on your Visa - call the CU and ASK them. Again, I would NOT use what money you took out of your 401K to pay on any credit card.

Do you have any money in any accounts with the credit union ? If you do, when you file for BK, they WILL take the money out of any account you have with them and you'll never see it again. So, if you've got any CASH in a CU account, take it out before you file.

 

[supergivingmom]

Thank you ladynred for your response.

I will follow your advice and use the money I have for living expenses only. After I know my medical status, I will then speak to a lawyer and plan my BK. In the meantime, I have quit using all CC's, as previous advised. (It was a cash only Christmas for me, I only used the Best Buy card since my son was going to pay for that purchase.)

I've never had a loan with my credit union, only the Visa card. I will dig out all old paperwork and read through to see what it says. I have my payroll direct deposit to that ckg acct and a very small (under $300) svgs acct. I will change that arrangement in the next few months, way before I file.

I have another ckg acct with a different bank near my home and will start using it for everything. I've banked there for 15 years but only have a ckg acct, nothing else.

Thanks again.

 

[Ladynred]

You're welcome - and I hope all that medical stuff turns out fine