Cash in bank accounts

[rcoveles]

I know this has been asked probably a zillion and one times, so here's a zillion and two..

I've read here that you should keep very little cash in your bank accounts on the date you file. I've also read varying strategies about stocking up on groceries, non-perishables etc.

I guess I still don't get it though. We have regular amounts auto-debited from our bank accounts monthly for mortgage, IRA, Life Insurance, health insurance etc.

The dates are pretty predictable..mortgage on or around the first of the month and so on..

Normally we just deposit our checks, and the balance can vary based on what is coming out when. I'm sure this is the case for just about everyone.

I guess my question here is - how do you handle this? Let's say I'm filing on the 28th of the month, and we have a thousand bucks and change in the account waiting to pay the mortgage. Assuming no or low wildcard exemptions - what do you do? If you draw the money out so it is not there - you still have it somewhere! I'm equally concerned about my business bank account for the same reasons. Have some autopays for insurance and other items.

I know it probably depends on a lot of things, but can you explain this stuff to the trustee, maybe show him a schedule of upcoming payments? I don't see how they can take all of your cash on hand when you have bills pending. Add to that, it is both my wife and myself, but I'm the only one filing. I'll be continuing my business, so I will obviously need some cash in my account.

OR am I misunderstanding this completely, like - do you just add the extra cash to your non-exempt pile for purposes of computing your payments?

[keepinitreal]

You control the date that you file. File a couple of days before you will be depositing money into any accounts, when your account is closest to being empty.

[rcoveles]

You control the date that you file. File a couple of days before you will be depositing money into any accounts, when your account is closest to being empty.

I guess I'll really have to monitor the cash flow then. I mean..our regular normal monthly expenses are probably $3000 or so at least. We have very little month left over at the end of our money, if you know what I mean. Guess I'll just have to pick a point where our normal weekly deposit will cover what is coming up.

[frogger]

I guess I'll really have to monitor the cash flow then.

Exactly. Your income and expenses should have a pattern if you are like most people. Go back over your history and see when your balance is at its lowest point. That history is probably a prediction of the future. If so, you will know when to file.

Good luck.

[forgotten]

I guess my question here is - how do you handle this? Let's say I'm filing on the 28th of the month, and we have a thousand bucks and change in the account waiting to pay the mortgage. Assuming no or low wildcard exemptions - what do you do? If you draw the money out so it is not there - you still have it somewhere! I'm equally concerned about my business bank account for the same reasons. Have some autopays for insurance and other items.

I know it probably depends on a lot of things, but can you explain this stuff to the trustee, maybe show him a schedule of upcoming payments? I don't see how they can take all of your cash on hand when you have bills pending. Add to that, it is both my wife and myself, but I'm the only one filing. I'll be continuing my business, so I will obviously need some cash in my account.

Easiest thing is to just pay your bills early. When you get paid go ahead and send in the mortgage payment, etc. even if its not due yet. Don't create a situation where you have $5000 in the day you file but you pay $4000 worth the bills the next week... pay them now instead.

[debtinohio]

umm. I have no idea what was in my account the day I filed. My attorney asked my balance a few weeks before and that's what I gave her. I could have had $100 or $7000 in there depending if I had gotten paid or not that day. She had down like $600 or something. I also never provided any updated bank account statement that would have shown that day, so hopefully it's all clear especially since I only have like $700 in there again now, . My 341 is in 2 weeks and the only further request for docs from the trustee were some divorce papers and the memo-title for a leased car.

[rcoveles]

What about "emergency" funds? I've read that 3x your monthly expenses is acceptable. When? Does that mean you can save up during your 13, or that you can start with that in a savings and be OK?

[debtinohio]

What about "emergency" funds? I've read that 3x your monthly expenses is acceptable. When? Does that mean you can save up during your 13, or that you can start with that in a savings and be OK?

You would have to exempt that much money. For me that would be $20K and no way I would be able to get that exempted.

With the expense room in your budget for household repairs, car repairs, etc. you can make the room to eventually save that amount during the plan. But it would be really hard.

[bigstick]

I'm close to filing but just got back 10k from tax returns. Attorney has listed it as cash in a bank account. Can I do something with that before filing? Won't the trustee look back to see what i've spent my money on in the past few months?

[NoTomatoCan]

Yes, you can spend it on legitimate expenses. Things like home/auto insurance (pay it up for the year) are good. Legitimate home/auto repairs. I believe up to 6 months of household supplies (time to stock up at Costco or Sam's club).

Those are some easy ones.

[StartingOver08]

I'm close to filing but just got back 10k from tax returns. Attorney has listed it as cash in a bank account. Can I do something with that before filing? Won't the trustee look back to see what i've spent my money on in the past few months?

The key is, can you exempt the funds in your bank account? If you can fit $10k of cash in your exemptions then you are ok. Its the funds that are in your bank account that are NOT exempted that the Trustee will want to be turned over to the BK estate. Some Trustee's are more insistant on this than others. Check your states allowed exemptions, including the cash exemption, here www.legalconsumer.com and then verify with your attorney.

[NoTomatoCan]

StartingOver - Is that true in a CH13? I thought assets that were not exempted could be retained so long as your plan satisfies the CH7 liquidation test?

[BKDefender]

bigstick
Ask your attorney about your ability fund your 2009 Roth IRA to the $5k/yr max, and fund your 2010 Roth IRA to the $5k/yr max. If your state exempts IRAs then you can do that and keep it through bankruptcy. If you withdraw it before 5 years there's a 10% penalty so you'd deposit $10k and get $9k out, but you wouldn't have to spend it all.
You can fund 2009's Roth IRA up until April 15, 2010. If your married you can fund your and your spouse's 2009 and 2010 Roth IRA allowing you to sock away $20k before filing BK and withdrawing $18k after you file. Legally you could withdraw it the day after you file BK but the trustee will already be upset about you doing something completely legal so withdrawing it immediately is just a slap in the face. I recommend my clients do this and withdraw it after they receive the discharge unless they need it sooner.

--William

[bigstick]

[QUOTE=BKDefender;377048]bigstick
Ask your attorney about your ability fund your 2009 Roth IRA to the $5k/yr max, and fund your 2010 Roth IRA to the $5k/yr max. If your state exempts IRAs then you can do that and keep it through bankruptcy. If you withdraw it before 5 years there's a 10% penalty so you'd deposit $10k and get $9k out, but you wouldn't have to spend it all.
You can fund 2009's Roth IRA up until April 15, 2010. If your married you can fund your and your spouse's 2009 and 2010 Roth IRA allowing you to sock away $20k before filing BK and withdrawing $18k after you file. Legally you could withdraw it the day after you file BK but the trustee will already be upset about you doing something completely legal so withdrawing it immediately is just a slap in the face. I recommend my clients do this and withdraw it after they receive the discharge unless they need it sooner.

Great Idea, I'll check with him on that. I know my 401k is exempt so I'm assuming an IRA would be as well.

[lrprn]

Does that mean you can save up during your 13, or that you can start with that in a savings and be OK?

It means you can save up during your 13 AFTER filing.

If you had that much in an account before filing, then your state's bk exemptions (or the federal if your state allows it) must cover the *entire* amount of cash completely. Otherwise your trustee can take whatever isn't protected.

This is a discussion to have with your lawyer who is familiar with what is acceptable in your local court.