Question on Filing Chapter 13 and DD Wedding

[dinodevil]

We have come to the conclusion after much deliberation that we can no longer rob Peter to pay Paul. I have not yet missed a payment at this time but we are getting by with paying the minimums and paying all of our living expenses through our credit cards. On the 14th we will miss our first payment. We are sick but just can't continue to live this way. It is all my fault, poor money management, poor financial decisions, buying things we couldn't afford and so on and so forth.

We will have to file Chapter 13 as we make too much. We rent so we don't own much, just regular household stuff, wedding rings, my DH has a 2009 Motorcycle that looks to be valued at around 3900.

I have used our credit cards up until this last weekend, but I have put them all in the drawer to write the numbers down and then will be shredding them. Once we stop paying the credit card bills, we will have money that we will save up as much as possible before filing and use cash to pay for everything.

My question is, my DD is getting married in August and we were going to give her $2000.00 to help pay for the wedding. She does not know this and my husband is insistent that we do something for her. I'm not sure how to handle this. If I take a $100.00 out every week and put it away until then, when we file and I just claim as cash on hand or something will that be ok? I would list it and I'm pretty sure this would be exempt but I don't want to make it look like I'm hiding anything.

I feel since I used some credit card to pay things like cell phones, cable, insurance and such (which is my normal habit) and I did this before we made the decision to file, I also charged some items on credit cards that were not necessities last month. I have returned items that could be returned once we made the decision, but some things still could not be taken back. I feel that we should wait out the 90 days so there is less likely to be an issue. We felt that we should go in and talk to a Lawyer mid June and maybe file in July. I would like to save up a little cushion before being in a tight payment plan for the next 5 years. I just don't know how close they look at your spending your cash prior to seeking a lawyer.

[leonel9]

I'd be concerned that a $2,000 transfer within a year or two before filing, for a non-essential purpose (e.g. a gift) may be clawed back by the trustee. Before you do this, speak with an attorney and get advice. There is really no need to wait to talk to attorneys, because you have a number of pre-filing transactions that it sounds like you're concerned about. Also, your attorney will not file the same day you meet with them -- so extra time to prepare can't hurt.

As far as saving up a cushion -- you run into a similar problem: If you have non-exempt assets, the expectation is that it is used to repay your debt -- either up front or through your plan payments. Have you reviewed the exemption list you are able to use?

[dinodevil]

I have looked at the exemption list and I believe we can use Federal Exemptions. Since we do not own a home can we use the unused portion of the Homestead Exemption up to $11850 x 2 since we both are filing? We have a motorcycle that is worth about $3900 and our Wedding Rings that would need to be valued but I can't see them valued very much, his is plain and mine isn't very big so I don't think they are not much. Cars we owe more that they are currently worth. Our cash on hand would be approx. $5000 and that would include the $2000. We have the typical couch, recliner, tv's kitchen table, bed and dressers (dressers were hand me downs 15 years ago) and general household items. I can't imagine that we would even come close to the exemptions listed for household stuff. I will be making an appointment next month with an attorney to get some answers and possibly put a retainer down.

[LadyInTheRed]

I agree that you should not wait to consult with an attorney so that you can get these kinds of questions answered based on your particular circumstances. Most BK attorneys give free consultations, so you do not need to be ready to pay a retainer in order to have a consultation. In fact, consult with 2 or 3 attorneys or as many as it takes to find somebody you are comfortable with and have confidence in.

The issue of making gifts before filing a Chap 13 and having non exempt assets is not exactly the same in a Chap 13 as in a Chap 7. These would create a minimum that must be paid to unsecured creditors during your plan. So, if you have $5,000 in non-exempt assets and a gift to your daughter, then as long as you have enough disposable income to pay your unsecured creditors at least $5,000 from your 3 to 5 year plan, it won't be an issue. This can become an issue if you have a lot of arrears on secured debt to pay and cannot pay anything to unsecured creditors.

Before you make that gift to your daughter, make sure you really can't qualify for a Chap 7. You say you make too much money to file a Chap 7. That statement always gives me pause, because some who have said that and have even been told that by an attorney, have gone to another attorney and end up getting a Chap 7 discharge. Are you aware that income alone does not determine whether you qualify for a Chap 7 discharge? Do you know for sure that you can't pass the means test? Consult with several attorneys before you commit to a Chap 13.

[dinodevil]

I will be making an appointment soon to speak with an attorney. I really want to wait to file until the 6 month look back is Apr - Sept. My husband worked alot of overtime from Jan - Mid March trying to make ends meet but that is over now but it really throws off those numbers. Plus he received a raise in January but they didn't pay him until Mid March so he has retro pay from Jan. - March added to that Mid March check as well. I also under withhold on my withholdings and we always have to pay in large amounts, so I think from what I have read that those can be added to the taxes line as well as my current withholdings if I don't change what I'm doing now. I'm not sure though I will have to find out when I have my meeting. If that is the case I could very well pass the means test. I've worked the numbers for different months and my best chance would be to file in Sept or Oct. I think. But I will definitely have to discuss this with the lawyer.

[tissa]

You can talk to a lawyer even hire a lawyer several months before you file, we talked to lawyers and picked one then waited 6 months to file. Mainly to save up some cash. Every situation is different so talking to a few lawyers before hand is best. You said you aren't paying credit cards any more so take any disposable income you have an put it into a savings account.

You may also want to go ahead and open an account at a bank you don't have any credit cards with so you'll be prepared for filing, most lawyers recommend this. I would also get a google voice account and change the phone number on all your credit cards to the google voice account that way you won't have creditor calling the phone you use. Just let them call the google voice number that check it every once in a while to see if you have messages.