CC transfer of balances

[Queenbgm]

What is the name of your state?What is the name of your state?OK

I am considering filing Chapter 7 but have a few questions. I have read some of the postings and am now concerned about fraud.

1. I have 3 CC's. In the last 30 days, I have had transfer balances on 2 to get a lower interest rate and lower monthly payments. The CC company direct deposited the amount into my checking account. If I file Chapter 7 I am afraid the deposits to my checking account and payments to 1 of CC's will look like I had more income and have been charging up the CC's. I did not increase the amount of debt, just rearranged the debt on 2 cards instead of one.
2. I had a installment loan for a vehicle for my daughter (22yo) which she was paying me but was unable to continue payments to me. I did pay the loan off and carry insurance on the vehicle for her. It is still in my name. I had always planned to put it in her name when it was paid off, but did not. If I file BK will they take the vehicle? valued at approximately 3500.00. I have a vehicle myself that I still owe approximately 11,000.00.

 

[AttorneyOney]

Fraud is when you incur a debt without the intention to repay it. A fraudulently incurred debt will not be discharged by a bankruptcy and might also lead to criminal liability. What you described doesn't sound like fraud to me, since you specifically said you were transferring balances for the (entirely permissible) purpose of reducing finance charges and monthly payments.

An interesting side effect of these transactions is that the trustee may be able to recover your payments to the two credit card companies as voidable preferences, provided they each amounted to more than $600 and occurred within 90 days preceding your filing. You can't get hold of that money (since the payments were voluntary), but it might make your case an asset case instead of a no-asset case. I would seek advice from an Oklahoma bankruptcy attorney on this point, since creditors and trustees pay lots more attention to asset cases.

All of a debtor's property at the time of filing becomes part of the estate. If a debtor has purely legal title to something, however, the trustee will surely abandon that asset as worthless. The arrangement you describe could be construed as purely legal title to an asset whose equitable title belongs to your daughter. The fact that you paid insurance and some of the loan militates against that conclusion, however. Again, a local lawyer can advise you better.

 

[AttorneyOney]

Follow-up

I just ran across a case with similar facts. In MBNA America Bank v. Ashland (In re Ashland), 307 B.R. 317 (Bankr. D. Mass. 2004), the debtor wrote two "convenience checks" from the plaintiff within 60 days preceding her bankruptcy filing. The proceeds of both checks went into her checking account. She used the first check to pay off the balance due on another, higher interest, credit card. She used the second to pay regular bills.

The bankruptcy judge held that the first check was functionally equivalent to a balance transfer and therefore outside the fraud presumption of section 523(a)(2)(C). The second check, however, was the equivalent of taking a cash advance. The judge found as a fact that the debtor had not intended to repay the plaintiff at the time she used the two convenience checks. In fact, she wrote the first check two days after her initial consultation with a non-legal employee at her bankruptcy counsel's office. Accordingly, he found the amount of both those checks to be nondischargeable.

Different bankruptcy judges might reach different results on the same facts. Had she not used the convenience checks at all, the debtor in Ashland would have been able to discharge all of her credit card debt. Had the balance transfer not gone through her checking account, the new lender would not have been arguing that it constituted a cash advance. It's not entirely clear how the judge would have ruled on that question if he had believed the debtor's testimony about her intention to repay.