Have I made a big bad mistake?

[niteflytes]

I'm in the process of filing ch7. I've paid my lawyer, turned in all the paperwork and am just waiting to file. I had about $1000 invested in one of those college savings funds for my daughter. Recently I discovered I need my brakes worked on and I'm also short on my mortgage payment so I put through the paperwork to get that $1000 (minus the little bit of penalty for not withdrawing it for Ed expenses) so I can get my brakes fixed and make my house payment. I absolutely HAVE to have my car for my job and I do a lot of driving so good brakes are a must.

Will this be considered liquidating an asset and have I done a really bad thing? Should I call my lawyer and tell him what I did? Should I panic?

niteflytes

[HHM]

I wouldn't panic. But, it is kinda cold hearted to use your kids college money. Strictly speaking, you would lose the exemption and you have liquidated an exempt asset and used it for a non-exempt purpose. You should probably tell your lawyer, especially if the account will be listed as an asset on your BK petition (which it should be). You can roll the dice and hope the trustee does not inquire further.

My attitude toward brakes is this...so long as I can still stop my car, then they are working. Also, brake problems don't just "suddenly" appear, they develop overtime and you probably could have come up with a plan to deal with it without using an exempt asset.

[niteflytes]

Honestly, I don't think it's "cold" to keep us safe in our car or keep us in our home. After the BK is filed I plan to get a part time job and put the $ back and hopefully more. I'm not totally insensitive to my daughter's future, however our immediate needs are more important than a measly $1000 saved for college.

That said, I appreciate the reply and the advice.

[niteflytes]

In my haste I forgot to add my reply to your opinion that the brake problem happened "over time". Actually, I agree. However, I was not aware there was a brake problem until the brakes showed symptoms of the problem late last week in which I promptly took it in to my mechanic to be looked at just this week. I really don't appreciate your judgemental comments. I'm not a mechanic. I'm a single parent, doing the best I can. Filing BK is stressful enough. I would think that as a moderator you would know better than to attack people on a personal level on a public forum. All I asked for was some BK advice. I did not ask for, nor do I appreciate extra comments on my personal life and decisions that I make. You do not know me, nor do you know all the details of my situation so please do not jump so quickly to judge.

[Grace]

There will always be a justifiable reason to take money out of the college savings account to help your child. In this case it's brakes so you can get to work and provide for the family. The next time it could be food, rent, clothes, or anything. The point of the fund you put the money in is to pay for your child's college education. Every other reason you take money out reduces your chances of reaching that goal. You can never make up lost investment money (college fund, retirement) because you lose compound interest.

I'm not at all judging your decision. I'm only describing what has and will happen if you continue to make the same choices. The college fund will be empty when your child goes to college if you take money out for any purposes other than college expenses.

Cars do need brakes and other maintenance. That's what you put money in a general savings account for. Take the total amount spent on the car per year and divide by 12. Then put that amount in savings every month for the car.

[FilingOnMyOwn]

You don't know anyone who can work on cars? Brake pads only run about $20 a set! $1000 is a horrible, horrible ripoff.

[ekelly4200]

You don't know anyone who can work on cars? Brake pads only run about $20 a set! $1000 is a horrible, horrible ripoff.

in her original post she also said she needed to make a house payment as well, not just a brake job.

[niteflytes]

I feel crappy enough about this as it is. I have no other resources. my mother is on SS income. I have no other family to turn to. My X refuses to do anything for his daughter beyond paying his share of support. I agree that savings is the best thing to do but my car can't wait a year for me to save enough money and if I do save any right now the trustee is going to take it when I file. If I HAD general savings the trustee would take it when I file. If I had money to save I wouldn't be filing BK.

I really didn't ask to be lectured on my choices to get my brakes fixed. My mechanic is a long time family friend and the manager at the place I get my car fixed so I know he's not BSing me about the brakes. If he says I shouldn't wait to get them fixed I believe him. All I wanted to know was if I'd made a BK related mistake.

I think all of us here are well aware that saving money is the ticket to financial freedom and we are all here because we want a new start on financial freedom. But if you would read my original post you would see that I'm in a spot where I can't get an extra job, I can't have extra money in my bank account because my lawyer has not filed the BK yet. Really...if anyone has any useful suggestions on how I can get my brakes fixed and make my house payment - without telling me what I "should" have done in the past - I will gladly put the money back into the college savings account. That money has been saved for my daughter for over 10 years through a lot of rough times without ever being touched. It's not like I steal money from my kid whenever times get a little tough. In the past I at least had a credit card to cover car repairs and I have no idea why I'm bothering to defend myself to people I don't even know

niteflytes - returning to lurk mode

[niteflytes]

it is NOT brake pads. I never said it was brake pads. I know brake pads are cheap. My friend at the shop often gives me under the table deals and just charges me for parts so I am not getting ripped off. Something is leaking...hydraulic fluid if I recall correctly. And the drums are thin and need replaced...please don't assume things. *Sighs*

[Spartan]

Ok I can sympathize with that. Please do not take offence. They are just making general comment, and do not specifically aim to judge you. If I were in your shoes, I would have most likely done the same thing. We can't worry about what is going to happen 10 years down the road IF we can't make it through the present dilemma. If the car needs brake, then the car needs brake. The college fund can be replendished. Getting yourself killed in a car accident, is irreversible.

You do not need to feel like you have to defend yourself here. If you want to add additional info that help people understand your situation better, that is all that is needed.

IF you keep your paper work for everything, you can explain your situation to the trustee. You didn't take the money and went on a vacation. Just as long as you have documentation as to where the money went and what for, you don't have anything serious to worry about.

You should tell your lawyer about it. But nothing to worry about.

[niteflytes]

Thank you

[Spartan]

If you have questions, feel free to ask. Don't worry about being judged or being jumped on. Don't take any comment personally. It is an anonymous board afterall.

[CATCHMEIFYOUCAN]

Niteflytes !

Hey, you are doing what is necessary, don't feel bad. I'm a gambler and continue gambling. No one here has made me feel bad about it. They highly suggest I go into a GA program. But honestly, I can't bring myself in to do that. I won some money a few days before I filed and got real worried, and told my lawyer, he said, "no problem," I spent the winnings on necessary expenses and have saved the receipts to prove it, if it should ever be brought up. Since than I've filed for Chapter 7 and am just playing the waiting game (think 60 days). I just got done another 341 meeting after converting from Chapter 13 to Chapter 7, no issues were brought up about anything (even the gambling - I'm sooo relieved of that!)

Best of luck to you ! Catchmeifyoucan

[SinkingFast]

There will always be a justifiable reason to take money out of the college savings account to help your child. In this case it's brakes so you can get to work and provide for the family. The next time it could be food, rent, clothes, or anything. The point of the fund you put the money in is to pay for your child's college education. Every other reason you take money out reduces your chances of reaching that goal. You can never make up lost investment money (college fund, retirement) because you lose compound interest.

I'm not at all judging your decision. I'm only describing what has and will happen if you continue to make the same choices. The college fund will be empty when your child goes to college if you take money out for any purposes other than college expenses.

Cars do need brakes and other maintenance. That's what you put money in a general savings account for. Take the total amount spent on the car per year and divide by 12. Then put that amount in savings every month for the car.

All your points are valid, Grace, but you are clearly a person who does not have to make these decisions.

The college fund or brakes for the car. The college fund or food for the table. The college fund or clothes on our backs. The college fund or a roof over our heads. Which would you choose if push came to shove?

We met with one BK attny who did not want to allow us to include our college aged son as a dependent, and all of the expenses we incur for him.

The attny flat out said, "You are not required by law to provide you child with a college education." And that is true. In the eyes of the BK Court, parents of college aged children cannot include expenses for tuition, books, and fees. If the child attends college away from home, BK Filers cannot even include those children as dependents for BK purposes.

Yet, the IRS clearly allows for deduction of college aged students who attend school away from home.

The clear and evident fact is NiteFlies is behind the Eight Ball right now and has not yet been able to work to the point to begin to save. In these cases, you do what you've gotta do.

While it's noble to want to help our kids with college expenses, what harm does a child suffer earning their college education all on their own?? Work, grants, scholarship, other forms of aid, small loans from time to time.

Who appreciates their education more. Those born with a silver spoon in their mouth of those who work for each and every opportunity they earn?

It's easy to say budget and set aside when you're to the point you can do that. We haven't gotten there yet. The entire year has been about putting out fires. Paying attny's fee, filing fee, Credit Counseling and Debtor Education. Auto repair expenses. We moved and needed Security Deposit up front. Plus moving costs. Buying tires for vehicles. Auto and Renter's insurance.

You tell me,.............. How do you set aside for the periodic expenses when the periodic expenses are happening EVERY month??!! $400 here, $500 there for car repairs and tires. $1K for auto insurance, another $400 for Renter's insurance. $1200 security deposit on the new rental. Moving expenses. Security deposits to the utilities companies. Unexpected medical expenses that arise.

When you find a magic formula that still involves eating, I'll be glad to hear it.

[sisterfunkhaus]

DON'T FEEL GUILTY!!! I know I'm going to be bashed for this, but you do not owe your children a college education. You do need to put food on the table and keep yourself housed though. You haven't even filed yet, and as long as you have receipts to prove what you did you probably don't have THAT much to worry about. I mean come on, needing to get your car fixed and pay for your house? Those are absolute necessities. Many people stop paying credit card bills and buy tires, freezers,clothing, get home repairs, car repairs, dental work, etc... done with the money. Using money for things you NEED doesn't seem equivilant to trading non-exempt assests for exempt.

If it makes you feel any better, my attorney pretty much laughed at many of my concerns that I bought from reading this board. She said I needed to stay off the internet that all of those exceptions were rare worst-case senarios. I obviously haven't listened. But my point is, don't worry too much if you are simply trying to get by and meet your family's needs.