Questions Regarding Bank Statements

[JLC1770]

Hi all, my husband and I have recently decided that we are going to file a Chapter 7. We have not yet met with an attorney as this is very new. In short, we went from being a two-income family to a one-income family and the debt just began to pile up. We are not behind on our payments, but have gotten into a revolving bad habit of using pay day loans to simply keep food on the table and pay the minimum credit card payments. Filing would give us the fresh start that we so desperately need. Our income does make us eligible for a Chapter 7. However, my question involves this. How far back does the trustee request bank statements? The reason being these two issues. My brother is getting married in Florida this summer and we used our tax refund to pay for our travel. (About $1500). In addition, our youngest son has autism and was struggling in the public school system. We pulled him out the remainder of the year and placed him in a special school. ($2050). I do not know if these expenses would be seen as luxuries. Thanks so much.

[LadyInTheRed]

If you didn't use credit for these items, whether they are luxuries or not is irrelevant. They won't be a problem.

What trustees ask for varies by trustee. You can count on them asking for statments for the month you file. Some trustees also ask for 6 months worth of statements. The trustee can ask for statements going as far back as they want. What they are looking for is transfers to insiders (family members) and evidence that you are hiding assets.

Luxury items and purchases become a problem if you charge them to credit cards shortly before filing. The trustee doesn't care about them, the creditor does and may try to get such debt declared nondischartgeable.

[bcohen]

If you didn't use credit for these items, whether they are luxuries or not is irrelevant. They won't be a problem.

Exactly. If the trustee requests several months worth of bank statements--which mine did not--then he is looking for evidence that you are hiding assets or failed to properly disclose your account balances. His job is not to scrutinize your past expenditures as to whether or not you "wasted" money on unnecessary or frivolous stuff. It is entirely possible that your trustee will only ask to see the current month's statement, as that was all I was required to provide.

Insofar as the tax refund, the trustee will definitely ask about that, but only from the point of view of seeing if you already received and spent the money. If you had not already filed, or if the tax refund money had not yet been spent, then the trustee would demand turnover of those funds unless you have an exemption to cover them. Since the money has already been spent, it is gone, and not available to the bankruptcy estate.

That being said, it may not be in your interest to file right away. I would recommend first stopping payments on all unsecured debts--as well as secured debts for things which you wish to surrender--and seeing if you can actually make ends meet on income alone. If you find that your necessary expenses exceed your current income, then declaring bankruptcy will not help. If you plan on defaulting on payday loans, it is extremely important to close whatever checking account(s) the payday lenders know about, and open a new account at a completely unrelated bank.

[JLC1770]

Thank you both for replies. Our income does not exceed our necessary expenses- our debts are taking up a huge percentage of what we earn. We do not currently have any outstanding payday loans, just unable to make more than the minimum payments on debt, if that some months. Would you still suggest a new bank account? Our medical debts are also significantly large and close to being turned into collections.

[LadyInTheRed]

If all of your payday loans are paid off, you probably do not need to open a new account unless perhaps you have an deposit account with a credit union who you also owe money to. If there is any chance that any of your creditors have your account information, then you probably should open a new account at a new bank just to be safe.