DH having trouble accepting the terms of BK

[lisac77]

DH is having a really hard time accepting the fact that we will be basically penniless when we file. He keeps wanting to just withdraw the cash from his savings account and "hide it" (I have no idea what he means by that!) or selling off business assets for cash and hiding those.

We have lost a lot of money during the operation of this business (5 years worth of savings that we contributed as a down payment - we won't get that back ) and to him spending any more and not holding some back for a rainy day goes against his normal operating procedure. He wants a safety net.

No matter how many times I explain to him that selling off business assets and hiding the proceeds is ILLEGAL (and will most likely end in criminal charges for him and us not getting to file BK) and that just taking the cash out of his account is tantamount to flushing it down the toilet, he keeps persisting in trying to find an angle so that he can keep some money.

During my research process I have come to realize that BK is a gift to us. It will give us a chance to start fresh and rebuild quickly. To me, that's an acceptable exchange for giving up all of our cash. I guess DH hasn't reached that place yet.

How can I help him face reality? Our lawyer thinks that DH doesn't really want to file BK, but I think he does, at least he does if he can do it on his terms. Unfortunately his terms aren't important here - the US Bankruptcy Court's terms rule us.

Sigh. I just want this over with.

[HHM]

Selling the business assets would probably be bad if it was done very close to the BK, however, you do have the "normal course of business" defense...but how much money are we talking about for the savings account. If its less than a $1,000, you could probably pull that out and "say" you used for living expenses...and the Trustee probably will not question it...especially if the withdrawal is made a few months before you file.

Not that I am advising you to lie to the trustee, but realistically, that is what the money "will" be used for. However, if its more than $1,000, then you will probably have some explaining to do.

In any event, have you spoken to a lawyer yet...because a business is involved, you really need to have a lawyer.

[lisac77]

We have spoken to a few lawyers. They all said the money (it's a lot - over $10,000) will have to be spent before we can even think about filing.

We are in the final stages of making our BK plan. We will likely be filing in February of next year (per our lawyer's advice). All the lawyers I have spoken with have assured me that this type of thing (taking a business asset and selling it for cash) is illegal and if DH were to do this we could get into major trouble with the trustee.

When we bought the business every transaction had to go through our bank for the disbursment of loan funds. So, say, if we wanted to buy a coke dispensing machine, we would have to submit the amount of the purchase to the bank, then the bank would cut a check directly to the seller of the coke dispensing machine. Then we would submit the receipt to the bank after we got the machine. We had to do this with each and every purchase we made for the business. So all those assets are "in hock" to the bank, and if we sold them we would essentially be stealing.

Nevertheless, DH persists in believing that he can carve out an edge for himself "under the radar" so to speak. He can't do this and file BK, though, because it's illegal.

[HHM]

Fair enough...but, he probably could sock away $500 to $800 from the savings. I am just trying to present you with something that would placate his need to have "something", and probably still have it fly in the BK. (i.e. have it not raise a red flag).

As for the business assets, you didn't mention they were "secured" (based on the way you described it, it sounds like the bulk of the assets were bought on some type of line of credit, correct), so of course, you can't just sell them. In addition, it's unlikely you could use the "normal course" defense for the sale of major assets.

What kind of business are we talking about anyway?

[lisac77]

It's a gas station.

[Spartan]

Here is how I would explain it.

It is NOT exactly becoming penniless, because what actually happens is, you are converting a non-exempted asset, the cash, into an exempted asset, home equity, ie the home improvement. His "money" is still going to be there, just in a different form!! And in a protected form! And he can cash out at a later day, clean and clear!

I would not attempt to skirt around the law here. You have a lot to lose.

Besides, we are not talking about him giving up the money. He needs to see that, it is just converting the money into a protected asset, which he can later get it back, in the form of appreciated house value. It is AN INVESTMENT!!

I think he will be smiling from ear to ear, after you explain it to him...

[niteflytes]

Maybe you could invest in one or both of you going back to school. It would have the added benefit of helping you with getting a better job and making more money in the future. I know it's not a way to directly save the cash but it would be a good investment for the future. And when you're done with the textbooks you can sell them on ebay :-)

[lisac77]

Spartan, I agree! Honestly the fact that we have to spend this money now will be beneficial for us in the long run by increasing the resale value of the house, not to mention making it easier to live in!

DH is upset because he says that he was saving this money for "retirement," but he neglected to tell me about it - I would have advised him to put it in an IRA. If he had been contributing to an IRA all this time, most of the money would be safe and we wouldn't be in this position.

I think he is just coming to terms with the loss of our initial investment. I know how he feels - that was my money, too! Not to mention, the essential waste of his time for the last two years. He has worked so hard and now has nothing to show for it.

So I think - I hope - when we sit down this evening to hash out our final plan, he'll begin to understand the necessity of using this money to our advantage.

[lisac77]

Maybe you could invest in one or both of you going back to school. It would have the added benefit of helping you with getting a better job and making more money in the future. I know it's not a way to directly save the cash but it would be a good investment for the future. And when you're done with the textbooks you can sell them on ebay :-)

Niteflytes, thanks for the recommendation. We both have college degrees, DH actually has a master's degree. We will probably try to get him back into what he was doing before the business (food manufacturing quality control). The lawyer said that if we had been preparing for this a few months ago, we could have started a 529 plan for our family, but it's too late now. We are likewise too late to just pay off a large portion of our mortgage, which was our original plan, but the lawyer feels that it would be a red flag to do it right now.