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$175,862.27 in Credit Card Debt and a Bleg

posted by Adam Levitin

I've been going through consumer bankruptcy filings recently and have been astounded by the levels of credit card debt that show up on some (but certainly not most) debtor's schedules of assets and liabilities. I've seen a bunch of cases with upwards of $60,000 of debt for a single debtor, a few with over $100,000, and the current record holder is $175,862.27. Yes, that's right, $175,862.27. That's larger than a lot of mortgages.

This debt was incurred on 25 cards from 12 different lenders, all major national financial institutions. No less than 9 of the cards and $80744.16 of the debt were for one lender, Bank of America. The debtor's annual post-tax income is listed at around $85,000, and the debtor has been in her current job and industry for a while.

These kind of cases ought to really make us ask what's going on with credit card lending. Clearly there is irresponsible borrowing. But it requires willing lenders. Cases like this look a lot like pushers and addicts. Unless we think a whole bunch of loan officers are routinely asleep at the switch, the best explanation is that card industry's business model is not based on getting loans paid off, but is instead, as Credit Slips guest blogger Ronald Mann has shown, a sweatbox aimed at generating returns by keeping consumers in a limbo of financial distress for as long as possible. If that's the case, we need to really rethink our model of credit card regulation and the BAPCPA provisions that stretch out the pre-bankruptcy period of financial distress.

So let me make a macabre request of those of you working in consumer bankruptcy trenches: would you send me a copy of any filings you encounter where there's over $100,000 of credit card debt on Schedule F? (These are public records once filed, so I don't think any confidentiality issues are involved.)


I've got you beat. I represented a Chapter 7 trustee in a case in the Western District of Washington where the debtor scheduled $272,000 in credit card debt (plus one with the amount listed as "unknown". AmEx alone was scheduled at $192,000 (though the proof of claim was "only" for $160,000). It was an odd case--the Debtor had been living an extremely high life with a "sugar daddy" paying the bills, and it was only after they broke up that the debt could not be paid. But still...

And the other credit card issuers, out additional tens of thousands of dollars? They didn't bother to file proofs of claim even though the trustee had $90,000 to administer.

I think $272,000 is our current record holder. Wow.

That's some sugar daddy for paying those kinds of bills...

I think the problem was that the sugar daddy _wasn't_ paying the bills. It's easy to be a sugar daddy if you don't have to pay...

In many astronomical fees and charges are added when the debtor defaults. Therefore when you see 10,000. The pre-default level is probably around 6K-6500. In my experience when someone defaults they add around 40% in fees/interest between default and bankruptcy filing on average.


You raise the point I've been hoping to get at eventually--what percentage of credit card debt is from actual purchases and what percentage is from fees and interest? How do you know that the pre-default level is about 40%? I haven't been able to divine this from bankruptcy filings; I would think the only source of information (other than card issuers) would be by looking at debtor's card statements going back a couple of years. This is a pretty crucial piece of information to know when considering the role of credit cards in consumer bankruptcy. Is the problem run-away spending or run-away interest/fees?

I am a consumer/small business bankruptcy lawyer in Austin, TX. My personal record is $317,000 in credit card debt for a debtor who made about $55,000 a year.

I had a Chapter 13 meeeting a few months ago where the unsecured credit card debt was $235,000. Because it was the last meeting of the day, I took a moment to ask the debtors how they had coped with the pressure prior to filing their case. They replied, "Filing the bankruptcy certainly relieved our stress. Of course, it wasn't too bad until it got above $175,000."

I'm a Chapter 7 Trustee, so I see lots of consumer petitions. I don't think it's at all unusual to see over $100,000 in credit card debt; my personal "record" in one of my cases (about 5 years ago) was a dentist with $496,000 in card debt. More astounding was that about 12 months before filing he was able to refinance his mortgage, even though a credit report then showed about $325,000 of card debt. It one of the reasons I have thought that the credit card industry blaming the debtors is rather like the drug dealer blaming the addict for buying drugs.

As a Chapter 7 bankruptcy trustee, I encountered one debtor with approximately $125,000 in credit card debt (she used all of the advance checks!), living on $8000 per year in Social Security income.

I represented a couple who had almost $170,000 in credit card debt. Sad case, really; they were in their mid-60's, resident aliens of Japanese origins. They bought and ran a strip-mall camera, film and developing store, but just got hammered with the advent of digital cameras. Nearly all of their developing equipment was leased, and it was expensive (they had a $10,000 per month nut on the equipment leases alone). They originally came to our office to get help renegotiating their lease, and it was just by coincidence that I asked them if they owed any money on credit cards. Due to her accent, I originally thought I heard heard the wife say "about fifteen" - I had to ask her to repeat it. I almost fainted when she said "a hundred fifty." At that point I told her that their problem wasn't the lease. Because of the dishonor involved in defaulting on their debts, they kept taking out credit card advances to make their payments (they'd already mortgaged their house to the hilt). I finally had to give them an almost two-hour lecture on how filing bankruptcy is not the social stigma in the U.S. as it is in Japan, and it took them almost a week to decide to do it. Even so, when I spoke to their daughter about a year later and asked how they were, she said her father, even though he was much less stressed, still would not talk about it.

It's the one debtor case I feel best about handling.

You can tell this by looking at the credit report. When the limit is 5k and the balance is 9k. There is usually 4k in interest fees charged since default. As credit card companies will let you go a little over. They will not that much. When you see a credit report whree they have 5 credit cards and they are all like this you can infer what it happening. Especially the small subprime cards with 250 dollar limits and they come in with a bill for 900.

It was run away interest and fees when I filed bankruptcy almost three years ago.
Like a fool , I plodded along for many years, paying, paying, and paying.
Then came set backs with my work and whatever gains I made were
erased by loan shark interest, over the limit fees even when I had not purchased anything, and an occasional late fee.
I was snowed in!
By the time I filed I had paid the balances on my accounts more than once.
Citibank, MBNA, Bank of Amercia, and Chase all made a lot of money on me.
Citi sold my account which was all interest and fees to a low life, slime, bottom feeder debt buyer who kept me in the dark about interest they were piling on. Unfortunately, I was so scared I agreed to monthly payments. None were credited to my account.But it wasn't until I had paid them almost $2000 over a period of months did I find out they were incresing what they said I owed! I was a scared, vulnerable woman and they knew it!
Imagine that! Buying that from Citi and piling on more fees!
The CC Co's cried to Congress that they were losing money and needed the new bankruptcy law passed, but the truth is, there are probably many people like me who paid way more than they should have.
I regret that I used credit foolishly, but I will never regret filing bankruptcy.
It saved my life!

Does anyone ever get prosecuted for overstating income on credit card applications?
Thanks for your answer.

Gleason--I've never heard of such a case, but it would be fraud if done intentionally. Given that card issuers don't verify income, I think it would be unlikely that they would know of such a fraud outside of bankruptcy. They could determine the debtor's income once in bankruptcy, but if they got a prosecutor to bring a case at that point, it might be viewed as an attempt to collect, in which case it would violate the automatic stay.

Also for Gleason--Credit reports aren't publicly available on a general basis, which limits their use for research. In any case, a credit report will tell you some, but not all of the picture. If the balance is 9K and the limit is 5K, then we know that at least 4K is interest/fees (other than a small amount overlimit permitted), but part of the 5K could also be interest/fees.

Thank you. I suppose if they don't prosecute any mortgage loan borrowers for overstating income (didn't all sub-prime borrowers do that?) they won't bother going after credit card "exaggerators". However, I googled a case in Australia where they put a unemployed guy in jail for it (he used the cash advance checks to pay living expenses).

Gleason--now that I think more about it, intentionally filing out false information on a credit card application is usually a federal crime--because the issuers are FDIC insured institutions. The Feds will certainly prosecute the fraud from card-based identity theft (if they can catch the culprit), but I'm not familiar with cases where there was a prosecution because someone got a card saying his income was $150K, when it was only $30K. Frankly, it would hard to show that the card issuer reasonably relied on the income statement, given that it is unverified and could legitimately change the very next day without the card issuer ever knowing. This isn't to say it doesn't happen, but I would expect it to be much rarer than prosecutions for other types of credit card fraud.

If we are in the $150K+ catagory of credit card debt, should we just keep plugging away monthly until we can't do it anymore or should be look at other options - right now we have never been late, not over any limits, can make at least a little more than the minimum, but the interest rates have recently jumped - Any info would help - we are in CT.

We have $169 in credit card debt, we've been making min monthly payments and I constantly call the credit card companies to try to get the interest rate reduced with no success(shall I include the list)of the new mob type lending institution policies. The response I get from the credit card companies is that the overall view of my history prevents them from being able to reduce. Am I being force to do what I've worked so long to avoid?

I'm sure it's not uncommon to slip into depression as the dark cloud never seems to go anywhere. Any suggestions? Pretty desperate!

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