Purchase right before filing

[Cassopher]

We purchased some inexpensive furniture 2 weeks or so before filing our chapter 13. It was an entire living room set (couch and 2 recliners) that we got from a discount furniture store for around $1400. If anyone would have seen what we were sitting on they would say it was a necessary purchase as the coils were popping out of the back of our old furniture and the fabric was ripped. My question is was this legal? I don't deem it as a luxury item as it was very much a necessity and I knew it would be hard to save the money for the purchase once our payments start.

[justbroke]

I can not tell you whether the purchase was anything other than "legal." That's not the real question that you may have in the bankruptcy inquiry. I am sensing that you paid cash for this so the real question for the Trustee would be whether it was a necessity (health and safety, living expenses, etc). You "may" need to explain the purchase but it may never even come up. A Chapter 13 is actually more forgiving than a Chapter 7 since Chapter 13 is technically a repayment plan.

There are some special rules in Chapter 13 and one is called the Chapter 7 liquidation test. Simply put, unless you can exempt the value of the furniture, you would just need to pay the value of the furniture to the unsecured creditors over the life of the Chapter 13.

It's a good question and I don't think it's one that should cause any grief. You will simply "schedule' the furniture as an asset and exempt any portion of it for which you have an available exemption. Any attorney working on this will be using a software package that will make sure you deal with that "liquidation test" as will the Chapter 13 Trustee.

[Cassopher]

Gotcha. You are right in saying it might not even come up. It all depends on how far back the trustee goes on our bank statements. If he only chooses to go back to the filing date then we are good but if he goes back further we will just tell him the truth, that is was a necessity. Won't sweat it though. Thanks

[justbroke]

The Trustees in Chapter 13s hardly look at bank statements. I think that I provided Sure, they may look back six months, but they are trying to find "large" amounts of money moving around and also to gauge your income (based on deposits). They are not performing a forensic accounting. (In extremely rare Chapter 13 cases, a case may be randomly selected for audit. )

Nothing to worry about at all. My Trustee only asked for six months of bank statements in my Chapter 13. They never mentioned anything (and my account had over $17K a month moving through it).