Expenses and buying other things prior to filing - advice?

[cspa522]

We are preparing to file in TWO WEEKS!! I can't wait to get this over with!!

Situation 1: I'm wondering how closely they're going to examine my bank statements and if they'll object to anything on them. I start Christmas shopping very early, and have, for the last month, tried to buy a present or 2 for my kids each time my husband or I get paid. These are all debited.

Nothing outrageous, usually less than $50 per purchase. This past weekend, however, I did a lot of holiday shopping, in addition to stocking up on the clothing we'll need for winter (replacing worn-out long-sleeved shirts, etc.). All at outlet stores, but still at places like Gap Outlet or Children's Place outlet. Again, no purchases over about $50. And I'm very good at "Even at outlet prices, I can still get this cheaper at Target," so I don't just pay for a name brand because it's a name brand.

Will the trustee look at this and say "She was shopping and spent $200 in one weekend (albeit at 6 or 8 different stores), we object to her filing!" ??

Or will it not be a big deal because there aren't any serious purchases of $500 or more?

Question #2: We are planning to take out about $200 in cash every week in the month of December to squirrel away. We are doing this because Missouri's wildcard or whatever it's called is pretty low, and we can't have more than about $500 in savings or checking without the trustee ordering us to turn it over when we file. Will they look at that and ask where $250 a week has gone?

Thanks everyone! Love this forum!!

[keepinitreal]

Not sure about the purchases, but I think the Trustee will ask about where the $250 a week cash withdrawals went.

[keepsmiling]

Similar question--- we have son's graduation pics, yearbook and driving lessons--- are these going to be frowned upon?
obviously won't be buying the fanciest package but still a significant outlay

[cspa522]

Not sure about the purchases, but I think the Trustee will ask about where the $250 a week cash withdrawals went.

I've posed this question to my attorney in an email. Waiting for a response.

[LadyInTheRed]

Question #2: We are planning to take out about $200 in cash every week in the month of December to squirrel away. We are doing this because Missouri's wildcard or whatever it's called is pretty low, and we can't have more than about $500 in savings or checking without the trustee ordering us to turn it over when we file. Will they look at that and ask where $250 a week has gone?

If you have cash squirlled away, you still have to report it as an asset. Otherwise you are hiding an asset and committing fraud. The withdrawals will be a red flag that will lead them to suspect you are hiding cash. But, in a 13, the trustee won't take the cash. Your plan just needs to pay unsecured creditors at least the value of your non-exempt assets. This is called the Chapter 7 liquidation test. During the life of your plan, the creditors must get at least what they would get if the trustee liquidated non-exempt assets in a Chapter 7.

[cspa522]

If you have cash squirlled away, you still have to report it as an asset. Otherwise you are hiding an asset and committing fraud. The withdrawals will be a red flag that will lead them to suspect you are hiding cash. But, in a 13, the trustee won't take the cash. Your plan just needs to pay unsecured creditors at least the value of your non-exempt assets. This is called the Chapter 7 liquidation test. During the life of your plan, the creditors must get at least what they would get if the trustee liquidated non-exempt assets in a Chapter 7.

My attorney specifically told us to get our bank accounts down to about $500 or the courts would probably determine that we needed to pay them a certain amount of money. So if we had $2000 in our checking account, they might determine that we needed to write them a check for $1500, and we keep the leftover $500. My question is, if we don't need to pay up on anything right now (insurance, etc.) how do I get money out of my bank account without raising eyebrows? I don't want to do anything illegal or fraudulent. That's why I'm asking! So I don't!

[sheilaE]

I can tell you what we've been doing....every single time we go to the grocery store, we pay with the debit card and get cash back. It shows on your bank statement as just a grocery store purchase, it doesn't say you got cash back. This is working for us right now because we have yet to file. Once we actually file, I'm sure we will have to hand over the grocery store receipts, but for now-prior to filing, it's helping us build a much needed savings/small Christmas for the kids fund.

[cspa522]

I can tell you what we've been doing....every single time we go to the grocery store, we pay with the debit card and get cash back. It shows on your bank statement as just a grocery store purchase, it doesn't say you got cash back. This is working for us right now because we have yet to file. Once we actually file, I'm sure we will have to hand over the grocery store receipts, but for now-prior to filing, it's helping us build a much needed savings/small Christmas for the kids fund.

I always debit everything, but I never keep receipts for groceries or anything like that. My attorney hasn't stated that I need to. I hope that isn't a problem. We're well below the allowance for food each month as it is, so I suppose that's why she didn't say we should save them? She actually raised our food budget to meet the Fed's standards.

[FishersMike]

And if you going to do cash-back by using Debit at the Grocery Store -- most stores have a limit of $25-$40 in one transaction. Wal-Mart and Sam's Club allows you to do $100.00 cash back.

[momofthree]

Some grocery stores report the amount of cash back on your bank statements (or maybe it's just my bank). Whenever I get cash back it breaks down the purchase on my statement and shows how much was for the purchase and how much was cash back.

But, like lady stated, any cash you have on hand needs to be listed as an asset. You wouldn't have to turn around and hand that money over or "write a check for $1500" on the spot though. You'd just have to pay at least $1500 to your unsecured creditors over the course of your plan (36-60 mos). This isn't a big deal for most ch.13 filers. $1500 over 60 months is only $25 a month, I'm willing to bet your payment is way more than that.

As far as the $200 you spent, you say "kids" so obviously you have at least 2 kids that you were buying clothing for. A family of 4 is allowed a monthly clothing/laundry budget of $244. So I don't see how they can argue with that expense. With the weather changing, it would make sense that you had to buy some new clothes/jackets/boots for the family.

[sheilaE]

We haven't been keeping receipts either, but once we file and if our plan isn't confirmed, then from what I've been reading on here, we might need to keep receipts to show that we do spend the allowed amount on groceries and clothing.
Also....Momofthree you always give great advice!

[LadyInTheRed]

My attorney specifically told us to get our bank accounts down to about $500 or the courts would probably determine that we needed to pay them a certain amount of money. So if we had $2000 in our checking account, they might determine that we needed to write them a check for $1500, and we keep the leftover $500.

Either you misunderstood your attorney or you should get a new one. The trustee does not take your assets in a Chap 13, but you do need to pay for non exempt assets during the course of your plan. [Section 1302 of the Bankruptcy Code describes the duties of the Chap 13 trustee, largly by referring to portions if Section 704 which describes the duties of the Chap 7 trustee. Section 1302, does not reference 704(a)(1) which is the duty of the Chap 7 trustee to collect the debtor's property. If you decide to look up the code, note that the current 704(a)(1) through 704 (a)(12) were 704 (1) through 704(2) before the 2005 Bankruptcy Act. The references in 1302 to 704(2) thru 704(7) where not changed to reflect that. Sloppy work!]

I don't want to do anything illegal or fraudulent. That's why I'm asking! So I don't!

I didn't mean to imply you planned to do anything fraudulent. Nothing in your post suggested you did. Just being clear about consequences, not only for your benefit, but for anyone else who reads the thread.

[cspa522]

Some grocery stores report the amount of cash back on your bank statements (or maybe it's just my bank). Whenever I get cash back it breaks down the purchase on my statement and shows how much was for the purchase and how much was cash back.

But, like lady stated, any cash you have on hand needs to be listed as an asset. You wouldn't have to turn around and hand that money over or "write a check for $1500" on the spot though. You'd just have to pay at least $1500 to your unsecured creditors over the course of your plan (36-60 mos). This isn't a big deal for most ch.13 filers. $1500 over 60 months is only $25 a month, I'm willing to bet your payment is way more than that.

As far as the $200 you spent, you say "kids" so obviously you have at least 2 kids that you were buying clothing for. A family of 4 is allowed a monthly clothing/laundry budget of $244. So I don't see how they can argue with that expense. With the weather changing, it would make sense that you had to buy some new clothes/jackets/boots for the family.

Mom, thanks so much. You've made me feel a lot better. As it turns out, we're going to have next to nothing in the bank when we file, so I don't really need to worry about that part of it. And you're right. I do get some expenses for food and clothing, so I should be okay there too. THANKS!!!

[cspa522]

Either you misunderstood your attorney or you should get a new one. The trustee does not take your assets in a Chap 13, but you do need to pay for non exempt assets during the course of your plan. [Section 1302 of the Bankruptcy Code describes the duties of the Chap 13 trustee, largly by referring to portions if Section 704 which describes the duties of the Chap 7 trustee. Section 1302, does not reference 704(a)(1) which is the duty of the Chap 7 trustee to collect the debtor's property. If you decide to look up the code, note that the current 704(a)(1) through 704 (a)(12) were 704 (1) through 704(2) before the 2005 Bankruptcy Act. The references in 1302 to 704(2) thru 704(7) where not changed to reflect that. Sloppy work!]

I didn't mean to imply you planned to do anything fraudulent. Nothing in your post suggested you did. Just being clear about consequences, not only for your benefit, but for anyone else who reads the thread.

I misunderstood. But thank you for helping me out. I also didn't think you were thinking I was going to try to scam the trustee. Just making sure it was clear I'm not! Part of my worry, though, is doing something that WILL be frowned upon by the trustee and not even knowing I'm doing it. If that makes sense! Part of the reason I love this forum, it really helps me figure things out! Thanks again!!

[MOMof3]

Chase reports what I get as cash back on my debit purchases right on my bank statement. I think that just started recently. Shop at places like Walmart and get your groceries and your toys, clothes & food, etc... Then when they see "Walmart" on your bank statement, you say it was groceries/necessary health items, etc... Some places will still let you get cash back when you write a check too, but that is usually limited to $50. We also made sure we had some cash at home when we filed. Not trying to defraud anyone, but not sure if someone was going to freeze our bank account, or if the garnishment went through for the wrong amount, or ??? I Wanted to make sure I could feed everyone! We also purchased some gift cards for Fred Meyer (kind of like a walmart) every week for a few weeks--again, that was more to make sure we had some money to feed the kids & get gas at the pump, etc... The trustee never said anything about our bank statement & nothing got screwed up--so I just used the gift cards to buy the necessities which is what the money would have gone towards anyway. I think if you made a huge cash withdrawal or had a big purchase at Best Buy or something, that's when they might use their highlighter and ask questions.