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Hi all,

I'm looking for some advice on refinancing a HELOC to pay off a huge amount of credit card debt. Several years ago we paid off the mortgage ($53,000) with a HELOC for a total line of $100,000. The bank closed the remainder of the HELOC because of declining home values.

Brief description of situation is: DH has not worked in the past 5 years (he's 61) and is not/will not return to work citing health reasons/mental reasons but has not/will not go to get any kind of medical help. In addition, my eldery parents (no siblings for me) moved in with us about the time he quit working. Bad decision, didn't work out - they ended up in assisted living. Over the past 5 years, my dad passed away, mom ran out of money, and until she passed last year, I was helping her fund her living expenses which were VERY large.

Bottom line is: I'm broke. I'm still working (I'm 59), but it just isn't enough to cover all the debt I've accumulated to keep it all going. Basically I was taking cash advances to pay my mother's caregivers. The debt is now roughly $60,000, which is more than my annual income. All but 3 of the cards are in my name alone.

So, I have two choices - file Chapter 13 or try to refinance (I'm talking with a broker this week) to get out from under the $2,500 or so I pay each month to creditors, in addition to regular living expenses.

And one more very important item - DH is unaware of the extent of all this as I just can't bring myself to mouth the words to him yet.

My concern is that the house will not appraise high enough, and that at our age should we really shouldn't be taking on more mortgage debt.

I would appreciate any comments an advice any of you could offer.
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Don't refinance. You will end up losing your home.

You need to seriously consider bankruptcy.

Is your DH ill enough to obtain Social Security disability? It is a long process for mental illness and isn't a solution for the short term.

Maybe others here can help with suggestions on how to convince your DH to seek help. Even with the help of the VA (illness is not service related), we have been ineffectively dealing with a mentally ill relative. He does not believe anything is wrong with him. His mother was unable to answer "Do you believe there is something wrong with me?". She really needed to answer YES!!!, but couldn't bring herself to do it.
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I was going to respond to this:

So, I have two choices - file Chapter 13 or try to refinance (I'm talking with a broker this week) to get out from under the $2,500 or so I pay each month to creditors, in addition to regular living expenses.

with a suggestion for credit counseling and a plan for either repayment for BK Chapt 7 might be an option.

Then I saw this:

And one more very important item - DH is unaware of the extent of all this as I just can't bring myself to mouth the words to him yet.

You better reach down into yourself and pull up that backbone and not just mouth the words to him, but freakin' shout them! He has hung around on his backside for 5 years refusing to see a Dr. and spouting nebulous claims of not being able to work due to a mental or physical condition (apparently he can't decide which) while you are struggling to keep this sinking ship afloat? Holy cow, woman! How long do you plan to wait to tell him? After you've been foreclosed on?

One thing I can tell you with certainty: if you don't talk to him about the situation and present a united front to do something about it, the situation will not get batter, no matter how hard you try.


LWW
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So, I have two choices - file Chapter 13 or try to refinance (I'm talking with a broker this week) to get out from under the $2,500 or so I pay each month to creditors, in addition to regular living expenses.

I will be very surprised if you find a broker to refi your mortgage if you are in debt to more than your income.

Why not look at Ch 7 instead of Ch 13? If $60K debt is more than your income and your husband doesn't work (by the way, I'd have kicked MY husband out 3 years ago when he'd been sitting around doing nothing for 2 years... would not let it get to 5 years!) then perhaps your income is below the state median? Thus allowing a Ch 7?
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doubloon1214: "I'm looking for some advice on refinancing a HELOC to pay off a huge amount of credit card debt. Several years ago we paid off the mortgage ($53,000) with a HELOC for a total line of $100,000. The bank closed the remainder of the HELOC because of declining home values."

I infer that you borrowed $53k of a 100k HELOC to pay a then existing mortgage. Did you borrow any additional funds from the HELOC before it was closed? What is the current balance of the HELOC? How much is your home worth today?

"Brief description of situation is: DH has not worked in the past 5 years (he's 61) and is not/will not return to work citing health reasons/mental reasons but has not/will not go to get any kind of medical help. In addition, my eldery parents (no siblings for me) moved in with us about the time he quit working. Bad decision, didn't work out - they ended up in assisted living. Over the past 5 years, my dad passed away, mom ran out of money, and until she passed last year, I was helping her fund her living expenses which were VERY large."

I am sorry that you had all these troubles.

"Bottom line is: I'm broke. I'm still working (I'm 59), but it just isn't enough to cover all the debt I've accumulated to keep it all going. Basically I was taking cash advances to pay my mother's caregivers. The debt is now roughly $60,000, which is more than my annual income."

I infer that you mean CC debt of roughly $60k, plus the current balance of the HELOC.

"All but 3 of the cards are in my name alone."

How many cards are there?

"So, I have two choices - file Chapter 13 or try to refinance (I'm talking with a broker this week) to get out from under the $2,500 or so I pay each month to creditors, in addition to regular living expenses."

Refinancing does not get you out from under the debt; it may lessen the current payment obligations (though that is not entirely clear to me). Refinancing also turns all the unsecured debt into secured debt. I am even less clear why that seems to be a good idea, BWDIK?

"And one more very important item - DH is unaware of the extent of all this as I just can't bring myself to mouth the words to him yet."

That is extremely unfortunate. Who owns the house? If your DH also owns the house, what makes you believe that he will agree to refiance?

"My concern is that the house will not appraise high enough,"

If refinancing were a good idea, then this might be an issue.

"and that at our age should we really shouldn't be taking on more mortgage debt."

You already have the debt; it is not more debt (unless you roll the costs of refinancing into the loan). Refinancing in your situtation is mostly re-arranging the form of the debt.

I would speak to a bankrupcty attorney and a quilified debt counselor (which will be required before any bankruptcy filing anyway).

You did not post many numbers (and no budget numbers), but from what little you post, it appears to me to be relatively bleak, unless you can enlist your DH in the battle and have him create some income. Any idea what his SS will be if he starts collecting at the earliest possible age?

Best Wishes (and sorry to be so blunt),
JAFO
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DH is unaware of the extent of all this as I just can't bring myself to mouth the words to him yet.

Assuming that the house was in both your names, how were you planning on getting the HELOC without telling him?

Sorry, but you have an even bigger relationship problem than you do a money problem. The fact that you were willing to pay for your mother's care by taking out cash advances without telling your DH something that obviously wrong. My suggestion is that you need relationship counseling, as well as financial counseling.

AJ
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OCD:

with a suggestion for credit counseling and a plan for either repayment or BK Chapt 7 might be an option.

One thing I can tell you with certainty: if you don't talk to him about the situation and present a united front to do something about it, the situation will not get better, no matter how hard you try.

LWW
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You have another option. Please consider it.

Stop making any payments at all on any of your unsecured credit card debt.

Devote your available income/cash flow to keeping up the mortgage/HELOC payments so you don't lose your house.

DO NOT refi by taking out MORE debt secured by your house. Under no circumstances should you do this. Don't even consider it.

DO NOT file for bankruptcy protection unless and until you are actually faced with foreclosure/eviction from your home. (But try not to let things get to that point.)

You are effectively judgment proof. Your objective should be to stay in your home as long as possible. It should not be to pay off your unsecured credit card debt.
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Thank you all for your responses. Yes, some were blunt, but that's OK...I already know I have a relationship problem. However, if you've never experienced being afraid of someone then you can't relate to what I'm trying to say. I'm not dealing with a mentally stable person. I'm dealing with someone who has convinced himself that he has worked, he has given all he has to give, and there's no more. He is done.

I do appreciate the advice on the refinance and am now convinced that it's not the way to go. To answer some of the questions, there is no other balance on the HELOC - just the payoff of the original mortgage which was done to get the payments where I could manage them (paying interest only on $53,000). There is very little chance that we will lose the house with the payments so low. I have 12 credit cards, three of which are mine only. I bring home $3,200/mo., but as you can imagine most of that goes to the card payments.

I like the suggestion to stop to paying any unsecured debt and have considered it. They will sue me, but if I'm judgment proof I guess that's not a concern.

To address the comment regarding the cash advances to pay for my mother's caregivers, since DH hated her and made daily comments about how much time I spent looking after her, he made me feel like I couldn't share that particular piece of information with him.

Thanks again...more later.
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Since there is earned income, they are not "judgement" proof. Creditors can obtain judgements against bank accounts. The worst case is that a judgement hits and causes mortgage payments to bounce.

It isn't as easy, as not paying. Especially, with a husband who has mental illness issues. Bankruptcy ends legal claim to specific debts.
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Since there is earned income, they are not "judgement" proof. Creditors can obtain judgements against bank accounts. The worst case is that a judgement hits and causes mortgage payments to bounce.

I've always wondered... can't a person wait until after he's revealed his accounts to the court, and then immediately run out and open a new account and transfer his money into it before all the other accounts get frozen up?

I'm guessing there are methods the court uses to prevent this, but I'm curious what they are.

xtn
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I've always wondered... can't a person wait until after he's revealed his accounts to the court, and then immediately run out and open a new account and transfer his money into it before all the other accounts get frozen up?

I'm guessing there are methods the court uses to prevent this, but I'm curious what they are.

xtn


I don't understand the goal.

Once bankruptcy is filed, creditors cannot procede with collection attempts. Bank accounts aren't "frozen." It is still possible to pay routine expenses. Continued use of credit accounts or obtaining new accounts would be fraud.

Hiding assets is fraud. Making large payments to specific creditor just before filing bankruptcy is not permitted and repayment can be ordered. Even creditors that were successful in obtaining funds from a judgement before bankruptcy is filed can be ordered to return the funds.

Annoying any court is a bad idea. If you annoy the judge, the simplest action the judge could take would be to deny the bankruptcy based on deception. Serious attempts at fraud could result in criminal charges could be filed.

Debra
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I'm guessing there are methods the court uses to prevent this, but I'm curious what they are.
Throwing your butt in jail if a credit check reveals you have done so...
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I've always wondered... can't a person wait until after he's revealed his accounts to the court, and then immediately run out and open a new account and transfer his money into it before all the other accounts get frozen up?

Someone could do this, but there would be records of any transfers, and a court could order a garnishment of the funds in the new account. The same thing would apply in a bankruptcy proceeding. When you provide the bankruptcy court with your list of assets, you declare that is true and complete. If the funds aren't there as the case proceeds, they would come after you for fraudulently concealing assets.

Here in Minnesota, once someone gets a judgment against an individual, they can ask the Court for an order for disclosure - which is a court order directing the debtor to provide complete and accurate information on a financial disclosure form. Basically, the court orders the judgment debtor to tell the judgment creditor what assets he or she has, so the judgment creditor can put a judgment lien on any real property or issue garnishment summons to employers or banks. If the judgment debtor fails to return the order for disclosure, the judgment creditor can ask the court to issue an order to show cause, which is an order directing the judgment debtor to come to court and explain why he or she should not be held in contempt of court for failing to complete the court-ordered financial disclosure form. In addition, the court can issue an order to show cause if it believes that the information on the financial disclosure form is incomplete or inaccurate.

I was recently involved in a case where the judgment debtor failed to complete the order for financial disclosure and the court issued an order to show cause. At the hearing on that order, the debtor still refused to complete the financial disclosure form, and so he was taken into custody for contempt of court. After cooling his heels in jail for a few hours, he agreed to complete the disclosure form. The judge made him state on the record and under oath that everything was completely accurate on the form. The judgment creditor then proceeded to garnish the listed accounts and subpoena the banks for records of transactions in and out of these accounts. Every time they found a deposit into one of these accounts they traced it to see if it came from an account undisclosed by the judgment debtor. Ultimately, the judgment creditor traced a deposit to an undisclosed account that held $75,000 that was liquidated into a cashier's check the day after the hearing on the order to show cause. The check had never been drawn on, so it was still out there. The Court immediately issued a bench warrant requiring the arrest and detention of the judgment debtor until the physical check was provided to the Court. In addition, the Court issued an order to the issuing bank to cancel the check, which basically reversed the transaction and put the funds back into the account.

All told the judgment creditor spent about $15,000 in attorney's fees just trying to track down the judgment debtor's assets. (The Court ordered the judgment debtor to pay these attorney's fees because they were caused by his attempts to avoid garnishment.) Ultimately, everyone got paid, and I don't believe the debtor is going to be subject to any further criminal sanction. Had he done something similar in Bankruptcy Court, he might very well have been prosecuted for fraudulent concealment.

Courts do not take the fraudulent concealment of assets lightly. I know that one of the 'real' housewives of NJ is in bankruptcy right now and the trustee has raised the specter of fraudulent concealment. We had a local case involving a formerly high-flying car dealer who was found guilty of concealing assets and other frauds upon the bankruptcy court - accordingly, the court made all of his many hundreds of millions in debts non-dischargeable in bankruptcy. Basically, if you lie to the bankruptcy court, it is free to say "no discharge for you!" In addition, you could be subject to criminal charges for bankruptcy fraud, which is what has happened to this car dealer and his girlfriend, who is alleged to have helped him conceal assets.

Unless you have always hidden your funds under the mattress, you'd be hard-pressed to successfully hide assets from a judgment creditor or from a bankruptcy trustee. I guess you could technically hide assets - e.g. clear out accounts into cash or gift cards, and the money could be concealed, but the courts would learn of the withdrawals, which would be sufficient to get you for fraudulent transfer.
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You are effectively judgment proof.

How do you come to this conclusion? The OP works, so there is income. Depending on the state that the OP works/lives in, this income may or may be garnished. But without knowing that, the income alone could make the OP far from 'judgment proof'.

The OP also owns a home, and apparently has enough equity that she is seeking a $60k (or more) loan on that equity. Again, without knowing the state that the OP lives in, the home equity could make the OP far from 'judgment proof'.

To the OP - If you follow the advice to just quit paying your credit cards without bothering to declare BK, you better understand the statute of limitations in your state, and your state's laws on how judgments may be used to attach your assets and/or income. In other words, you should probably consult an attorney before deciding to take this course of action.

AJ
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vkg,

You wrote, Since there is earned income, they are not "judgement" proof. Creditors can obtain judgements against bank accounts. The worst case is that a judgement hits and causes mortgage payments to bounce.

It isn't as easy, as not paying. Especially, with a husband who has mental illness issues. Bankruptcy ends legal claim to specific debts.


Depends on where doubloon1214 lives. And as a technicality, the judgment is obtained against an individual, not an account - the court subsequently issues a garnishment order (or whatever its called in that jurisdiction) against assets (or income) detailed by the defendant (or the claimant), less any allowable exemptions claimed by the defendant.

But you're right. It's probably not as simple as not paying...

- Joel
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vkg,

xtn wrote, I've always wondered... can't a person wait until after he's revealed his accounts to the court, and then immediately run out and open a new account and transfer his money into it before all the other accounts get frozen up?

I'm guessing there are methods the court uses to prevent this, but I'm curious what they are.


You wrote, I don't understand the goal.

Once bankruptcy is filed, creditors cannot procede with collection attempts. Bank accounts aren't "frozen." It is still possible to pay routine expenses. Continued use of credit accounts or obtaining new accounts would be fraud.


I don't think xtn was referring to BK - just to the judgment.

Ironically xtn lives in one of the few states where doubloon1214 might be more or less "judgment proof" (never liked that term, because it's really nonsensical), assuming she responded to any complaints and followed court procedures. In Texas, you cannot garnish wages for a debt and there are substantial exemptions you can claim for your home, cash and personal property among other things. If you are more or less living paycheck to paycheck here beyond what you have in your house, car and retirement accounts, it's next to impossible for a creditor to seize anything from you ... at least until you die.

Unfortunately doubloon1214 doesn't tell us where she lives. But she can go to this site ( http://www.carreonandassociates.com/articles/collectionlaws.... ) to figure out more or less what to expect when it comes to collecting on bad debts if she's thinking of defaulting...

- Joel
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In Texas, you cannot garnish wages for a debt and there are substantial exemptions you can claim for your home, cash and personal property among other things. If you are more or less living paycheck to paycheck here beyond what you have in your house, car and retirement accounts, it's next to impossible for a creditor to seize anything from you ... at least until you die.

Although it is true that unpaid wages may not be garnished in Texas, this simply means that a judgment creditor cannot get a garnishment order requiring an employer to garnish wages before a paycheck is issued to an employee. Once those wages are deposited in a bank account (e.g. through direct deposit), they may then be garnished from the account (subject to any relevant objections). Texas law is crystal clear that once wages have been received by a debtor or are subject to his or her control, they are not free from garnishment. Fitzpatrick v. Leasecomm Corp., No. 12-07-00487-CV (Tex. Ct. App. Sept. 17 2008) ("A long line of garnishment cases has consistently held that wages cease to be 'current' and are no longer exempt when they are received by the wage earner or become subject to the wage earner's control."). Link here: http://www.12thcoa.courts.state.tx.us/opinions/htmlopinion.a...

Sorry, I just wanted to clarify this point - I think someone from Texas could easily think that "wages are exempt from garnishment" to mean that they could always protect their salary from any judgment creditor, which is clearly not the case.
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To answer some of the questions, there is no other balance on the HELOC - just the payoff of the original mortgage which was done to get the payments where I could manage them (paying interest only on $53,000). There is very little chance that we will lose the house with the payments so low.

This might be an okay attititude to take for now, but not for the long term. For the long term, you are treading on dangerous ground.

Your interest only payments on the HELOC have a limited time frame. After the original draw period is over (often 5 years or 10 years - read your contract), you will probably have to start making amortizing payments, which will significantly incrase your payments. How much it will increase is dependent on the terms of your HELOC contract.

Additionally, as the rate that your HELOC is based on (often the prime rate) increases, even your interest-only payments will increase. Many HELOCs do not have cap on the interest rate. The prime rate is at historical lows of 3.25%, and has been as high as 21.5% http://www.wsjprimerate.us/wall_street_journal_prime_rate_hi... If your HELOC is at prime + 1 with no cap, your monthly interest only payment on $53k would be $994 - over an $800 increase from the current prime + 1 payment of $188. Even if the prime rate doesn't get back to historical highs, but just increases to, say, 8.25%, where it was 4 years ago before the credit crisis hit, the payment would increase to $409.

If you quit making payments on your credit cards or if you declare BK, you are likely to have little to no chance of refinancing into another HELOC so you can continue to use the I/O 'feature' to keep your payments low.

However, if you've never experienced being afraid of someone then you can't relate to what I'm trying to say.
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To address the comment regarding the cash advances to pay for my mother's caregivers, since DH hated her and made daily comments about how much time I spent looking after her, he made me feel like I couldn't share that particular piece of information with him.


Unfortunately, by taking the course of action you took, you will probably appear to your husband to have chosen your mother's financial well-being over your husband's financial future. However mad he may have been then, he's probably going to be a lot madder now. If you are scared of him, you probably need to look for a way completely out of the relationship that will provide you protection.

AJ
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Thanks for the great reply RedFi!

So... an unethical person who plans ahead could just cash his paychecks instead of depositing them, save boatloads of cash under his mattress, and thus cheat the system?

Maybe courts should have the power to order a home search if it suspects this type of thing.

xtn
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Hi everyone,

I live in Florida.

I find it very scary to just quit paying on all this debt.
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AJ,

You are, of course, right about how my husband will likely feel. But he didn't consider MY financial future either when he abruptly quit working, with no intention of ever returning...right at the time that I had to deal with my parents at age 91 and 92. He was fortunate in that his parents passed away in their 80's with little or no need from him, either financially OR emotionally, and he had three brothers.

Thanks again for all your insight. I've pulled the plug on the broker about refinancing and I'm going to just keep plugging away at this issue.
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Hi everyone,

I live in Florida.

I find it very scary to just quit paying on all this debt.


In some cases, just stop paying on debt can work or it can create a lifetime mess. Even after the statue of limitations, credit applications can contain clauses that reactivate debt. It will require staying on top of the situation. Depending on your state, it may mean living without a bank account.

Social Security is suppose to protected from judgements. The requirement that Social Security payments be direct to a bank account has created the situation where as soon as the funds are deposited, they are vunerable.

Where there are ongoing expenses, such as with a seriouly ill family member, it is best to delay bankruptcy until the situation is resolved.
This isn't your situation.

It maybe possible to just walk away. Declaring bankruptcy will be less stressful.
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You are, of course, right about how my husband will likely feel. But he didn't consider MY financial future either when he abruptly quit working, with no intention of ever returning...right at the time that I had to deal with my parents at age 91 and 92. He was fortunate in that his parents passed away in their 80's with little or no need from him, either financially OR emotionally, and he had three brothers.

It sounds like you are angry at your husband, as well as being afraid of his reaction. (And it sounds to me like you have ample reason to be angry at him.) However, if/when you talk to him about the financial situation, please don't use the words "fortunate to have his parents pass away in their 80's." I suspect you will not be talking about financial matters after that statement.


--Booa
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But he didn't consider MY financial future either when he abruptly quit working, with no intention of ever returning

Unfortunately, the mantra "Two wrongs don't make a right" seems to apply here.

IMO, you have both committed acts of financial infidelity against each other that have sabotaged the potential for you to live the life that you thought you were both committed to.

You each need to commit to stopping further sabotage, and to try to repair the damage that has been done. If you are not each committed to this, you are unlikely to achieve financial stability as a couple. If he is unable to commit to this because of his mental state, you need to seriously think about what your goal in this relationship is, and if you are able to achieve it with only your commitment and his continued sabotage.

AJ
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doubloon1214,

I wrote, Unfortunately doubloon1214 doesn't tell us where she lives. But she can go to this site ( http://www.carreonandassociates.com/articles/collectionlaws.... ) to figure out more or less what to expect when it comes to collecting on bad debts if she's thinking of defaulting...

To which you replied, I live in Florida.

FWIW, Florida is the other big dead-beat state. http://www.carreonandassociates.com/articles/collectionlaws....

It's almost as good as Texas. There is no wage garnishment for consumer debts and there are homestead and vehicle exemptions - though they're supposed to limit you to no more than $1,000 in equity in your first auto. The site doesn't go into any additional exemptions.

But as others have mentioned, even being a deadbeat in these states can be a hassle if the creditors pursue collection actions and attempt seize any assets - especially bank accounts. In the end, if you walk away from your debts it may be necessary to close your bank accounts and live off of a cash diet for several years.

Also, I find it very scary to just quit paying on all this debt.

Good. You should. It's a big step to become a deadbeat that doesn't pay their debts. I would never recommend it; but I do tell people that it may be a legitimate option in some cases. I can't say if it is in yours; but at least you should have some idea what will happen if you take that route.

- Joel
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