getting a huge return

[tallberry]

Our attorney told us to get our taxes filed, get the return and spend it on neccessities before we file. No problem right? Well, I just found out we are getting $9,000 back on our taxes (mostly because I started a business and wrote off a lot for business expenses). We need to file this month for sure....how in the world can we spend half of this money? I mean we all need our teeth cleaned, I need my eyes checked (haven't had them checked in years and can't see a thing) and probably glasses, my son's car needs serviced (alternator problems), etc. How do you think this will be viewed by the trustee? Oh yea, I forgot, we have about $5000 or so that we have left as a wildcard exemption. So technically we don't have to spend ALL of it but still $4000 (which is a ton to us)! Any thoughts please?!!!

[FreshLikeADaisy]

Tallberry, unfortunately I don't have this particular problem but the first thought I had was to pay down any *undischargeable* debt. Second thought was to make part of it exempt via a contribution to your IRA or other exempt retirement account. Also, when was the last time you bought shoes? Clothing? What else is wearing out that has needed replacement but you've been putting off?

Regardless of what you decide, this isn't a problem that will last long, so enjoy it while you can. Best wishes!


P.S. If it's spent by the time you file, you won't need that wildcard exemption for it -- you probably already know this but thought I'd add it just in case.

[BKFLA]

Our attorney told us the same thing, but we're filing federal exempt so I'm not sure if that makes a difference. We aren't filing until March 17th, but our return was for 5,000. MOst of it is gone for living expenses, I wish I could say it went to something fun! Our lawyer said to keep any receipts over $350-400 in case we get a picky trustee. I hope you can find a better answer. Best of luck to you.

[tallberry]

Thanks Fresh and BKFLA, So we won't get spanked for putting money in my IRA even though I can't recall the last time I had the money to contribute to it? Also, can we pay our rent with it and our cell phone bill or other bills that are due? I don't know why I am having such a hard time spending money...I just want to be sure we don't make any mistakes now that we are in the home stretch to filing, ya know?

[millerc507]

Don't forget things like tires, brakes, etc.

[danaf]

I agree with the IRA idea. Put something away for yourselves! Just check and make sure there is no time limitation ahead of filing to open an IRA.

[tallberry]

yes, danaf, that is a great question. I currently have an IRA and a ROTH IRA that are exeempt. I have not contributed to either in the last year (other than a rollover), if I contribute right before I file, will the trustee object? Millerc, you must have been reading my mind....we will definitely do all of the needed repairs on both my husband's and son's vehicles. Both are in dire need!

[danaf]

what state do you live in?

[tallberry]

Fl

[FreshLikeADaisy]

Tallberry, I would not put a *huge* amount in the IRA, but a few hundred in both. If you have outstanding bills like past due mortgage pmts on a house you intend to keep, or cell phones you intend to keep, definitely get those current! See, the thing is that if the money is gone prior to filing, it's gone -- UNLESS you do something like give it to Aunt Ginny (preferential payment) or transfer it offshore (hiding assets) or use it to buy a pile of rare coins that you then fail to list as an asset (luxury purchase, fraud). The things you are thinking of using the money for are nowhere near that; in fact, I think your sense of what not to do may be a little TOO keen, if only because of too much use! So sit down, think it over, decide what assets you are going to keep or reaffirm in your bk, what non-dischargeable debt you may have such as student loans, and start there.

Keep in mind that if the trustee doesn't like a payment you made, he doesn't go after you, he goes after the payee. That right there eliminates most creditors, as well as exempt accounts like the IRA and non-dischargeable debt (like taxes or school loans; is he going to go after the IRS or Fannie Mae? I think not ) so you're good.

Keep receipts, be prepared to explain it, be aboveboard in all you do with it, but don't hesitate to get the things you need for your family and your house to keep living. For someone who's been broke forever (like me ) $9000 is an insane amount of money, but it is relatively small to the court. So relax, and get your dentistry work and brakes and shoes and eyeglasses and roof fixed; these are not luxury purchases... even if they seem so to you because you've had to wait so long for them! I hope this helps. Good luck!!!

[tallberry]

It helps a ton, Fresh, Thank you, Thank you. I think you hit it on the head...for some reason in my mind, getting a pair of glasses SEEMS like a luxury. We need to file yet this month and it will take another week before we get our return. So that virtually gives us a week or ten days to spend a S*** load of money. I am a firm believer of flying under the radar and I don't want to give the trustee anything to question. So, Fresh, are you saying that you think spending about half of the return in that short of a time span shouldn't be an issue to the trustee (just looking for your opinion)?

[danaf]

FLD - why not put a huge amount in an IRA? I looked up the FL exemptions and it doesn't give a restriction as to when that money has to be in the IRA ahead of filing BK. Whereas for example, if you look up AZ exemptions, it has to be in an IRA 120 days ahead of filing BK. I would think dumping 3,4 or 5k into an IRA is a very viable option for the OP. Even if the trustee doesn't like it, the code is such in FL that he/she can't do anything about it. Of course, I would check with a few attorneys on it first.

The things you are planning on spending the money on are good options as well and liike FLD said, are not luxery. But it isn't always that easy to spend such a large amount of money in such a short period of time.

[FreshLikeADaisy]

Tallberry, my *opinion* (so take it for what it's worth ) is that so many people rely on their tax refund as a lifeline -- INCLUDING using it to pay for the bk! -- that I do not see it as an issue at all, and in all my reading (again, take it for what it's worth) I have not heard of it being an issue to the trustee, who is used to Ch7's coming in without a dime. I actually think you might have more issues with the money you bring into bk and have not spent, than I do with all the necessities you are intending to buy beforehand, and that's why your atty told you to spend as much as you could prior to filing. Yes, you can and will use your wildcard to cover it, but be prepared to answer whatever questions the trustee may have. Either way, though, this is not a huge issue at all: if your exemptions are all in order the trustee may salivate at your $5k but won't be able to take it, and your purchase of necessities prior to bk is basically spilt milk by the time you file, as long as you didn't purchase assets as I mentioned earlier. I really honestly think that you are very honest and scrupulous, and that at least in this, you may be too scrupulous for your own peace of mind.

That said, Danaf, my thought on the IRA thing is that even if it's not spelled out in the law in FL like it is in AZ, the main goal is to avoid the *appearance* of asset sheltering prior to bk. Not the reality, because technically that would keep you from spending a dime as soon as you decided to file -- but the *appearance*. Regarding code, it would actually be easier for a trustee to do something about it in FL, where a limit is NOT written into the law and thus leaves room for a trustee to litigate it for a specific determination, than it would be for a trustee to do something about it in AZ, where the law itself leaves no room to take it to court and see if a judge will throw him a bone. Also, when you break a clearly written law, the penalties are usually pretty fairly set -- in AZ, you might get your case dismissed in this particular example -- but when there's no specific in the law, judges either rely on case law (how other judges have decided) or it becomes a test case (the first of its kind on a particular point of law). Me, I don't want Tallberry -- as remote a possibility as this may be -- to be a test case! And I have no idea how judges in the Middle District here have ruled on potentially excessive pre-bk IRA contributions. So basically, a few hundred in each account to me seemed like a safe place to start: too little to scream fraud or make the trustee salivate, and enough to make a dent in that $9000 along with everything else mentioned.

Personally, I think that if Tallberry gets her refund direct deposited and can start shopping immediately, it won't be a big deal, once you throw in car repairs and dental work. That $9000 will be gone before she knows it. You were right to suggest that Tallberry ask the atty (he should definitely know what the court's view on IRA contributions are here!) but those are my thoughts.

[tallberry]

I really don't know what I would do without you all! I feel like someone always has my back on here...Thanks soooo much. I think I am going to stick with a few hundred in each account, fix the cars, get the glasses, etc. I'm sure that money will be gone before we even know it.

[ameliabedilia]

Our car insurance company will let you pay for the whole year at once. That might help you out if you haven't already paid it.