Pre-BK filing Cash Spending Question

[Itried]

I am thinking about filing a BK13 in a month or two and I will receive a nice bonus this month and I am wanting to do some home improvement projects with cash not on credit before I file the 13. Does anyone know if that will affect my BK in anyway?

[Flamingo]

I am thinking about filing a BK13 in a month or two and I will receive a nice bonus this month and I am wanting to do some home improvement projects with cash not on credit before I file the 13. Does anyone know if that will affect my BK in anyway?

First without seeing a lawyer you don't know if you can even file Chapter 13 and secondly, you will need to provide information on at least six months of your income (when we filed Chapter 13 in 2002 we had to provide 12 months). You will also be requested to provide your most recent tax returns.

[Itried]

Actually I have talked to a few lawyers and I think 13 is the direction they are pointing me to. If they do look at my last 6-12 months of course the bonus will show up, but I will say that I had some projects that I needed to take care of and here are the receipts - how is that going to get looked upon? Or should I just save my bonus?

I will most likely be doing the 100% payback because of my income.

[wayne-o]

you should be fine to do the projects you speak of. They only cared about what I had in the bank the day I filed my 13. Nothing more.

[qwertysue]

I am thinking about filing a BK13 in a month or two and I will receive a nice bonus this month and I am wanting to do some home improvement projects with cash not on credit before I file the 13. Does anyone know if that will affect my BK in anyway?

One of the ways it will affect your BK is that when calculating your income it will be included in the 6 months income which will be doubled to come up with your annual salary. A $5,000 bonus will be $10,000 additional income for the year. At least this is what would have happened had we filed a month sooner than we did.

[Itried]

Hummm Thanks for the information. I am not sure if I can wait an additional 6 months to file based on the fact that I want to stop a foreclosure. But it seems like whether I spend it or not it will be calculated as income.

[nazstar]

I would talk to the lawyer. I also get a bonus (in February). I wanted to use that to get some things for the new baby, pay back a few family members, etc. I was told the no payments to family members are allowed because of preferential payments. I was told that the bonus would be counted as income and most likely taken by the court. If i went ahead and just spent it, it would be seen as a purposeful dwindling of assets and would be seen as "bad faith". IF I used the money for living expenses and necessary things, I could justify it - ex: getting all dental work done, make sure everyone has their checkups, get all my prescriptions restocked, get the car fixed, etc. Just make sure before you do anything. If "home improvement" means getting your roof fixed - that's one thing. But if you mean upgrading appliances, etc, that could be seen as blowing the money in bad faith. At least this is how it was explained to me by my lawyer.

Because of the bonus, I am waiting 6 months from February to file. I am giving up the house and already abandoned it. I am collecting my bonus, then quitting to be a full time stay at home mom. Believe it or not, it made sense with an infant and another on the way for us to become a one income family. Otherwise our income was so high, we were paying the court on a 60 month plan and would have to hire someone to watch 2 children under 1 year old while we worked just to pay the court.

[lrprn]

Hummm Thanks for the information. I am not sure if I can wait an additional 6 months to file based on the fact that I want to stop a foreclosure. But it seems like whether I spend it or not it will be calculated as income.

If you file Ch 13 *BEFORE* the bonus comes, it won't count as income.

Then it depends on your trustee and the customs in your local court whether you can keep your bonus after you file or have to turn it over to the trustee to disburse to your creditors. An experienced Ch 13 bankruptcy lawyer in your area should have a good idea how that will play out in your situation.

Sounds to me like you have a lot more questions to get answered about your case. Don't make any assumptions on what you may be told here. There's tremendous variability around how Ch 13s operate from district to district, even trustee to trustee - far more variability than there are in Ch 7s.

[DebtHeadache]

I too am getting a bonus of about $1500.00 in February and I was planning on using that money to file bankrupcy with. Will this cause a problem?

I have not talked to a lawyer yet I am putting that off until after Christmas. I stopped paying my personal loan and CC about 4 months ago.

Any advise is appreciated.

[nazstar]

If you file Ch 13 *BEFORE* the bonus comes, it won't count as income.

REALLY? I was told differently by the first lawyer. He told me that he would have to claim it as expected income and amend it if it didn't get paid for some reason.