Author Topic: Should I pay off a maxed out accounts or go bankrupt?  (Read 1312 times)

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RobinMontrose

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Should I pay off a maxed out accounts or go bankrupt?
« on: February 26, 2017 08:46:06 PM »
My girlfriend is in credit card debt to the amount of around $220,000. Mostly credit cards but also a couple of (non-car) installment loans. We've had health problems and have no income and have been using her credit to live on using one card to pay the other. my credit is long gone but her's is still perfect payment history although she's almost maxed out. So I sold some land for $220,000. So it's now possible to pay off her debts. What would be the best way to do this? Should I just let her default and we live off the cash? Pay off ALL the debt then go back paying the bills with credit card advances? Pay off part of the debt?

I'm not sure what's the best way to go about this. My thinking is to pay down all her debts so at least her credit improves and for now continue to live off credit until we can get some income going. This way she still has her good credit and we still have that money to spend (and perhaps more if we can obtain more credit).

Clydesmom66

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #1 on: February 26, 2017 08:54:35 PM »
I would look at what the smallest debts are and pay them off.  Pay down as many of the rest as you can to 50% or less to reduce those minimum payments and leave at least $150k in cash reserves to live on bare minimum expenses until you both can be working again.  DO NOT live off credit, cut the cards up.  Pay the minimums until you both are working again.

With a $220k cash reserves the best you could hope for would be Chapter 13.  The trustee will not allow you to keep that much money while your creditors get nothing on the debts.  The court will seize it.
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Bobby12

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #2 on: February 26, 2017 09:17:42 PM »
I'm honestly wondering if this is for real or a joke?? Your girlfriend has $220k in consumer debt and you have $220k from the sale of land. Neither of you have income and you live off of her credit cards which are almost maxed out. You'r actually asking if you should pay it off for her and then go back to living off her credit cards again? And possibly taking out more debt? Why would you possibly need more credit cards? If she's just your girlfriend (and not a common law wife), then she should file Ch 7. You've got plenty of money to live on for a while (and hopefully put something away) as you both look for some type of employment. And she can recover credit wise from a BK in a year or two. I'm sure there's probably more to the story than your telling but I would stop paying immediately and contact a BK atty.

BellEbutton

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #3 on: February 26, 2017 10:01:20 PM »
My girlfriend is in credit card debt to the amount of around $220,000. Mostly credit cards but also a couple of (non-car) installment loans. We've had health problems and have no income and have been using her credit to live on using one card to pay the other. my credit is long gone but her's is still perfect payment history although she's almost maxed out. So I sold some land for $220,000. So it's now possible to pay off her debts. What would be the best way to do this? Should I just let her default and we live off the cash? Pay off ALL the debt then go back paying the bills with credit card advances? Pay off part of the debt?

I'm not sure what's the best way to go about this. My thinking is to pay down all her debts so at least her credit improves and for now continue to live off credit until we can get some income going. This way she still has her good credit and we still have that money to spend (and perhaps more if we can obtain more credit).

First, you say she has a perfect payment history.  How is that possible with no income?

Then, you say "pay down all her debt so at least her credit improves".   That contradicts that she has a perfect payment history.


RobinMontrose

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #4 on: February 27, 2017 08:48:44 AM »
She's never been late or missed a payment.

RobinMontrose

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #5 on: February 27, 2017 08:51:01 AM »
I would look at what the smallest debts are and pay them off.  Pay down as many of the rest as you can to 50% or less to reduce those minimum payments and leave at least $150k in cash reserves to live on bare minimum expenses until you both can be working again.  DO NOT live off credit, cut the cards up.  Pay the minimums until you both are working again.

With a $220k cash reserves the best you could hope for would be Chapter 13.  The trustee will not allow you to keep that much money while your creditors get nothing on the debts.  The court will seize it.

The cash is in my name. Not hers. She has good credit but is maxed out. I have cash but my credit is totally shot.

Bruno the JDB Killer

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #6 on: February 27, 2017 12:23:14 PM »
She's probably be going to be looking at 29% interest soon when the Ponzi scheme payments won't work any more, or they catch on to what she's doing. That's over 60K a year in interest. Get her to a BK attorney and have her live within her means. Your money is yours.
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BrokeBob

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #7 on: February 27, 2017 02:03:36 PM »
I agree 100% with Bruno.

Lets say you use all your money to pay off her debts.  Let us also assume your relationship will be permanent, and that you won't be bailing out someone who will walk out on you later, leaving you but taking your money.   If that is the case, she will soon be paying $60k a year in interest alone.  Or, if you pay off all her debts, maybe since she isn't working, she gets into big debts again, but this time you don't have the money to bail her out.  So she runs up the same debt, or bigger, and you have the same problem a few years from now, just without the $220k  of your money that is now gone. 

If she is not working now, this is probably the best time for BK. 

I have been down a similar path.  My wife and I got into debt, so we refinance the house.  Payments get too high, so we run up more credit card debt.  Can't make the payments, so take out lines of credit.  At one point I cashed in some stock options to get through a few months, which was a big mistake. 

Let me repeat myself.  You can either deal with the problem now, while you still have YOUR $220k, or you can deal with it later, after the $220k is gone.  If she files BK, your $220k is protected. 

Now, if she is temporarily unemployed and needs some temporary assistance to get through, that is another matter.  She would need that help anyway, even if you ran through your $220k. 

She can go through a big, but recoverable, pain now, or else go through a much bigger and much less recoverable pain later. 

fisthardcheese

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #8 on: February 27, 2017 03:26:20 PM »
Lets say you use all your money to pay off her debts.  Let us also assume your relationship will be permanent, and that you won't be bailing out someone who will walk out on you later, leaving you but taking your money.   If that is the case, she will soon be paying $60k a year in interest alone.  Or, if you pay off all her debts, maybe since she isn't working, she gets into big debts again, but this time you don't have the money to bail her out.  So she runs up the same debt, or bigger, and you have the same problem a few years from now, just without the $220k  of your money that is now gone. 

And that is "best case scenario" here.  But what is much more likely to happen is that you will use your $220k to either pay her debts or live on for the both of you until it is gone, then she will also be gone leaving both of you in debt and broke.
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trueq

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #9 on: February 27, 2017 03:51:01 PM »
The one thing I would NOT do is use the $220,000 and pay off the credit card debt.

1.)  I would check to see if she could bankrupt...Ch.7 only.

2.) If not ( if forced to a Ch. 13), and you don't need her credit for anything in future (given you have $220,000, you could pay cash for a house), just default.     You can probably negotiate this pile down and get rid of it for $25,000 easy, using techniques on this board.    Especially arbitration technique if sued.
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Flyingifr

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #10 on: February 27, 2017 04:13:44 PM »
My girlfriend is in credit card debt to the amount of around $220,000. Mostly credit cards but also a couple of (non-car) installment loans. We've had health problems and have no income and have been using her credit to live on using one card to pay the other. my credit is long gone but her's is still perfect payment history although she's almost maxed out. So I sold some land for $220,000. So it's now possible to pay off her debts. What would be the best way to do this? Should I just let her default and we live off the cash? Pay off ALL the debt then go back paying the bills with credit card advances? Pay off part of the debt?

I'm not sure what's the best way to go about this. My thinking is to pay down all her debts so at least her credit improves and for now continue to live off credit until we can get some income going. This way she still has her good credit and we still have that money to spend (and perhaps more if we can obtain more credit).

Since your credit is trashed and hers is pristine, but except for taking your entire nest egg and paying off her debt so the two of you can repeat the cycle of living on credit instead of earnings, I see the following alternatives (in no particular order)

1: Use the $220K to pay off her debt. When that is done she has no debt but the two of you are once again broke with no source of income, so the credit cards will quickly be used again. The only difference is that this time, you have no more resources to bail yourselves out. Problem with this: You can use your funds to bail HER out, she can turn around and say "Sayonara, Sugar Daddy" and there is nothing you can do about it. In that case you will have no assets, no income and no credit, so she is free and clear and free to abandon you in a heartbeat, and you are stuck.

2: You don't mention anything about what is happening with your creditors? Are you about to get sued? Are there any judgments against you? How much and what type of debt do you owe and how close to SOL is it? If you own the land, you could use the cash to settle your debts and leave hers alone. That way at least you get SOME benefit out of the deal and if she says "Sayonara" she takes her debts with her.

3: You could both live off the $220K and not incur any additional debt and let nature take its course. If she gets sued, she gets sued - you can't (or maybe Shouldn't is a better word) stop it. After all, suing her is like suing the sunshine. You can see it, feel it, touch it and enjoy its effects but other than warmth you won't get anything out of it.

4: She can file BK, you can't.
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RobinMontrose

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #11 on: February 27, 2017 08:45:53 PM »
And that is "best case scenario" here.  But what is much more likely to happen is that you will use your $220k to either pay her debts or live on for the both of you until it is gone, then she will also be gone leaving both of you in debt and broke.

That's possible. However, when it comes to getting a new job or an apartment it's important. My girlfriend works in an industry that definitely requires credit checks to get a job so she feels she needs good credit. Not to mention she's been to an extent brain washed by the lending industry.

The way I look at it is in a worst case scenario (no income) I can get further with a 230k credit line (which will grow) than the 230k I have in cash now. I do understand that either way without income it will end the same way. But if we get on our feet then her credit is saved and we have large credit lines to fall back on. At least that's my thinking.
« Last Edit: February 27, 2017 08:56:38 PM by RobinMontrose »

RobinMontrose

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #12 on: February 27, 2017 08:54:08 PM »
I agree 100% with Bruno.

Lets say you use all your money to pay off her debts.  Let us also assume your relationship will be permanent, and that you won't be bailing out someone who will walk out on you later, leaving you but taking your money.   If that is the case, she will soon be paying $60k a year in interest alone.  Or, if you pay off all her debts, maybe since she isn't working, she gets into big debts again, but this time you don't have the money to bail her out.  So she runs up the same debt, or bigger, and you have the same problem a few years from now, just without the $220k  of your money that is now gone. 

If she is not working now, this is probably the best time for BK. 

I have been down a similar path.  My wife and I got into debt, so we refinance the house.  Payments get too high, so we run up more credit card debt.  Can't make the payments, so take out lines of credit.  At one point I cashed in some stock options to get through a few months, which was a big mistake. 

Let me repeat myself.  You can either deal with the problem now, while you still have YOUR $220k, or you can deal with it later, after the $220k is gone.  If she files BK, your $220k is protected. 

Now, if she is temporarily unemployed and needs some temporary assistance to get through, that is another matter.  She would need that help anyway, even if you ran through your $220k. 

She can go through a big, but recoverable, pain now, or else go through a much bigger and much less recoverable pain later.

She is temporarily unemployed but I was stating the worst case scenario. Best case scenario is I save her credit, we quickly find jobs and not incur any more debt. Then we have her good credit if we need it with high credit lines instead of the cash in the bank.

Bruno the JDB Killer

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #13 on: February 27, 2017 09:01:03 PM »
Dude, you are delusional. This is not a situation you want to be in. You'll end up with massive new debt, no cash, a missing girlfriend, and that "why did I do this?" look on your face. You really need to seek counseling. This will not end well for you.
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RobinMontrose

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Re: Should I pay off a maxed out accounts or go bankrupt?
« Reply #14 on: February 27, 2017 09:13:50 PM »
She's probably be going to be looking at 29% interest soon when the Ponzi scheme payments won't work any more, or they catch on to what she's doing. That's over 60K a year in interest. Get her to a BK attorney and have her live within her means. Your money is yours.

There's kind of more to it Bruno. At this point she has two 20k cars and 30k in the bank so I don't know what to do with those assets if she declares BK. I have CA's after me and am in the credit repair process so I don't feel comfortable with holding assets.

In the past she saved my credit in a similar way so I trust her and owe her as well.

 

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