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Bankruptcy v. default


johnransom
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Apologies to the mods if this is not the right sub-forum for this, but I need some advice on a situation:

My mother-in-law, who is on disability and therefore has very limited income, has credit card debt way beyond her capacity to pay. She has started bankruptcy proceedings, but has come up against the problem that here in Alabama you can only exempt a lousy $5,000 of your homestead. Even though she owns it in joint tenancy with my wife and myself, the equity is well over $50,000, putting her share well over the exemption. As a result, the trustee will only agree to a Ch 13, with monthly payments of $350, which not including what we give her, is a good 50% of her total income. Offensively punitive, if you ask me, but her attorney can't get the trustee to budge.

So, she has a couple of options. She can take the Ch. 13, along with all the cash strains that implies. She can quit-claim her share of the house to us and go Ch. 7 (although that will mean losing the real estate tax exemption and sock my wife and I with a $650 annual bill). Personally, that strikes me as a fraudulent conveyance, but her attorney says it's perfectly legit. Alternatively, she can just simply live with the defaults on all her credit cards (a couple of store cards, an Amex card and a Visa with a bank named Direct Merchants) and let the chips fall where they may. Obviously, she is already seriously delinquent on all of these anyway and is receiving not just phone calls but CMRR letters. My question, then, really regards this last option. Given the current economic and banking environment, are OCs getting more aggressive in their collection efforts, up to and including filing suit more frequently than has historically been the case, even against borrowers like my mother-in-law, who is likely to get a fair degree of sympathy from the courts? Whatever help you can give would be appreciated. Thanks.

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Well, as she is on disability, her income is exempt from garnishment if there is a judgment I believe. Did you ask the attorney what all consequences would be to default?

Also, she can send C&D letters to prevent the calls and mail

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depending on what collection law is in AL, they could eventually lien the house.

I would transfer her house to you if you are sole heir. (living trust or whatever vehicle proper to protect it from creditors.)

String the credit cards along for now (6 months should be plenty) and eventually just default.

In the interim, get some cease communication letters, DV, and if a lawsuit happens, answer and defend. That will buy you at least 2 years.

If a judgment happens, it still takes more time to collect. Her income should be exempt. (At this point, there is no house for them to go after on the judgment collection....)

At this point, she is judgment proof.

However, you could still Ch. 7 at this point, if you can't stand the annoyance of periodic legal dealing that may happen.

BK lawyers cannot technically advise you to do this. They will never tell you to default, answer and defend. They don't make money doing that, and very few, if any, BK lawyers will defend debt suit litigation.

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depending on what collection law is in AL, they could eventually lien the house.

I would transfer her house to you if you are sole heir. (living trust or whatever vehicle proper to protect it from creditors.)

String the credit cards along for now (6 months should be plenty) and eventually just default.

In the interim, get some cease communication letters, DV, and if a lawsuit happens, answer and defend. That will buy you at least 2 years.

If a judgment happens, it still takes more time to collect. Her income should be exempt. (At this point, there is no house for them to go after on the judgment collection....)

At this point, she is judgment proof.

However, you could still Ch. 7 at this point, if you can't stand the annoyance of periodic legal dealing that may happen.

BK lawyers cannot technically advise you to do this. They will never tell you to default, answer and defend. They don't make money doing that, and very few, if any, BK lawyers will defend debt suit litigation.

My experiance with my bk attorney is he just files the bk,goes to court with you and after that if any problems occur he told me to write them a letter.An if there's any feed back he'll write one.He has a hard time lifting up to fart.:shock:
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Awesome links.

I like the article "If you sue debt collectors, they tend to NOT want to talk to you again!"

Maybe I should hold off my filing my debt collection lawsuits, to keep racking up violations!!!!

There is no shortage of debt collection scumbags out there!!!!

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