Money in checking account on file date

[WantToBeDebtFre]

I've been wondering about this. Everyone says not to have money in your checking account on the day you file. What happens to this money? I usually always have about $1000 to cover my mortgage, car payment, etc. Will they take this money? Will I have a chance to explain these funds are for bills I have coming up?

Thanks to anyone who knows the answer to my question.

[lrprn]

I've been wondering about this. Everyone says not to have money in your checking account on the day you file. What happens to this money? I usually always have about $1000 to cover my mortgage, car payment, etc. Will they take this money? Will I have a chance to explain these funds are for bills I have coming up?

On the day you file Ch 7 bankruptcy, a snapshot is taken of your financial picture. That snapshot includes what is in your checking account on filing day. Also on the day you file, your trustee takes control of all of your finances, including your checking account.

Most bk lawyers suggest having no more than $250 in the account on filing day and that all large outstanding checks have cleared already. That is because even though you may have written checks that haven't cleared yet, the trustee can take any amount of money in your account not protected by an exemption on filing day to hand over to your creditors.

There have been a few real-life cases where trustees took unprotected money from checking accounts that the filer already wrote checks against for mortgage or car payments and those payments bounced. These trustees didn't care that the money was earmarked for other purposes - unfair as it is, that's the law. That's why if you can't protect the entire amount in your account on filing day, it's best to take the money from your account and purchase money orders or certified checks to make your important large payments right before you file to make 100% sure you don't have this problem.

[WantToBeDebtFre]

Thank you for your answer but when you say the trustee takes control of my account, how long does that last? My paycheck is direct deposited in my account (no option for paper checks). The next time my check is deposited will the trustee try to take that or is it only the money in the account on the day I file?

Also, if I withdraw the money the day before I file to buy money orders for my bills will that raise a red flag with the trustee?

[freshstart06]

When my landlord returned the rent money the day before we filed, we took the money out and thankfully, we had an outstanding bill for the electric, we bought grocery, we used it for gas, and made a money order for rent on new home. We will be paying the security deposit on the 15th because we did not want any chance of the trustee taking that money. just keep receipts of the things you spend it on or make a money order for your mortgage dated before you file.

[JRScott]

Keep to a minimum as the others said even if you need to take a money order out for mortgage etc.

The Trustee can take out of your accounts any non exempt amount that is in the account at the time of filing.

Anything earned after the filing date is yours.

[lrprn]

when you say the trustee takes control of my account, how long does that last?

Until your Ch 7 case is closed. However, being in control of your bankruptcy estate doesn't mean the trustee can do whatever they want with the money in the account. The only money in the account that iis vulnerable is whatever sn't protected by an exemption on the day you file. What state are you in? We can tell you what your exemptions are and how much is protected if you aren't sure.

My paycheck is direct deposited in my account (no option for paper checks). The next time my check is deposited will the trustee try to take that or is it only the money in the account on the day I file?

As JR explained, it's the amount you have in the account on the day you file that isn't protected by exemption that matters. Whatever comes into the account starting the day after you file is yours. The only exceptions to this are if the money is from an inheritance, divorce settlement, or life insurance payout and you get it within 180 days of filing - by law money from these three sources belongs to your trustee and will go to your creditors unless your lawyer can show your trustee isn't entitled to it.

Also, if I withdraw the money the day before I file to buy money orders for my bills will that raise a red flag with the trustee?

You don't wait until the day before. Time your filing to have your account naturally at its lowest point.

If you don't know when that is, look back over your last few months of bill payments and match it to your checking account accounting mailed from your bank every month (most banks have this information online as well). See when the payments are actually being taken out of your accounts. Plan to file when your account is naturally at its lowest. If you can't do that (or don't want to), then save the receipts for whatever you take out of the account close to filing so if your trustee does ask, it's obvious what you used the money for.

A bankruptcy lawyer can help you sort this out. Have you made free consultation appointments with 3-4 in your area yet? You will learn a great deal about how to plan to file and what will happen when you do.

[WantToBeDebtFre]

Thank you everyone for your responses. I live in Michigan and I have been in touch with an attorney. I have loaded him with questions but this is one that I've been wondering about and didn't ask him. This forum is great and I'm glad I've stumbled upon it.

[whatamess]

Ive have $20 in my checking account, enough to keep it open. Ive been using money orders for months pretty much, minus an auto deduction every month. Ive been using an envelope method for budgeting, so there is no money for anyone..banks, trustees or mac card toting hubby to take. After I file and get use to this budget I will start using checks again.
WAM

[frankies_mom]

We had $15 in our checking account the day we filed. Didn't even plan it that way. Just happened to work out right. Thank God.

[emoney]

All monies such as checking accounts and savings accounts become the proerty of you BK estate. Keeping the accounts open is OK but keep the amounts in the small.
After my 341 hearing I had to give the trustee an amount equal to the sum of the monies in my checking accounts.
regards,
emoney

[lrprn]

After my 341 hearing I had to give the trustee an amount equal to the sum of the monies in my checking accounts.

Unless there was a lot of cash that couldn't be covered by an exemption, I haven't heard of this happening before, emoney. Is this what happened to you?