New to forum and 'gift' question

[ajk518]

First, I'd like to say how helpful this forum is. I've only recently discovered it and found it enormously supportive as I reviewed old posts. We are 16 months into our plan and have been paying everything on time and seemed to be doing ok with our budget. A few months ago, we were hit with a large car repair bill ($1200) and a plumbing issue ($500) which quickly through us off balance. We are now one month behind on our mortgage.

My MIL just informed us that she will be giving us a $5000 gift for christmas (she recently sold some property). This is extremely generous and not a common occurance. We would like to use the money to get caught up on our bills. My question is do we report the gift to our attorney and trustee? Will the trustee take the money? After paying bills, we would like to use the money to START an emergency fund---which we currently don't have. After paying for last month's and this month's mortgage, we could still have around $1600 left. Will we lose it?

[lrprn]

My MIL just informed us that she will be giving us a $5000 gift for christmas (she recently sold some property). This is extremely generous and not a common occurance. We would like to use the money to get caught up on our bills. My question is do we report the gift to our attorney and trustee? Will the trustee take the money?

Ch 13 is not like Ch 7 - what happens income- and expense-wise after filing can matter.

Did your trustee provide any instructions when you filed about what you were to report after filing?

I would definitely talk to your lawyer to get his/her thoughts about this. My guess is that he's going to say an extra one-time $5K gift won't matter, but best to know that for sure now.

After paying bills, we would like to use the money to START an emergency fund---which we currently don't have. After paying for last month's and this month's mortgage, we could still have around $1600 left. Will we lose it?

Depending on how rigid your trustee is, if you have one of the *very* rigid ones, it's possible that you might lose the whole $5K. That's why it's important to tell your lawyer and get sound legal advice about what to do quickly *before* your MIL gifts you with the money.

One option to consider if the news isn't favorable to keeping all the cash (hopefully it won't be) is to have your MIL keep the $5K and dole it to you out a little at a time only as needed. Let her be the keeper of your emergency fund. That way the cash won't be even a blip on the radar of your trustee.

Keep us posted. I'd love to hear what your lawyer says about this situation. And it's great to hear that your MIL is such a generous woman!

[Flamingo]

Prior to receiving these funds, contact your attorney. These funds are additional funds appearing in your financial world during your chapter 13 and therefore need to be reported. Not do to so risks dismissal. We received additional funds during our chapter 13 of a gift and of a taxable income nature and the trustee does not always keep the funds. Provide your attorney with a listing of what you could use those funds for (i.e., your computer is ancient and on its last leg and your son/daughter needs it for schoolwork, you need a new water heater, etc., etc.) and, if possible, provide estimates or documentation that the work or item is needed. We were able to keep almost all of the funds we received by doing that and note we did not lie about it, we actually needed the items/work done.

[ajk518]

Thanks for the good advice. I'll call our attorney tomorrow. I'm going to stay positive. I don't believe our trustee is 'rigid'. We did have a tax refund this year and were able to keep it to pay for a large dental bill. Hopefully she will allow us to keep this money too. I believe my MIL will be giving it to us at Thanksgiving, so we have a few weeks to work things out. Thank you.

[tjs1970]

put it in a safe.........enough said..........so many on this website do not account for this option but it is a viable one that i am pursuing vigorously

[justbroke]

put it in a safe.........enough said..........so many on this website do not account for this option but it is a viable one that i am pursuing vigorously

Not that simple if a.) there's a trail, and/or b.) what you're suggesting is not necessarily ethical. The reason people need to consult their attorney, is to make sure they don't jeopardize their case.

Now, in this poster's case, it's a very specific and relatively large amount of money being gifted. Sorry, but that's income by definition, and for a Chapter 13, you pledge all disposable income to the custody and control of the Trustee (unless you're in a 100% plan).

The Moderators and I can't instruct someone to hide money. If the person is represented, they can find the best way to deal with this. It could be the MIL paying the missed mortgage payment directly and/or doing other things in the poster's stead.

Trustee's aren't all bad when it comes to necessities that crop up during a Chapter 13. As stated above by flamingo, repairs, health needs, and car issues, are common things that face Chapter 13 debtors on a DAILY basis. The goal of a Chapter 13 isn't to punish the Debtor, but to provide the best dividend to the unsecured creditors.