getting a huge return

[FreshLikeADaisy]

Oooh, good idea Amelia! Good luck Tallberry!!!!

[tallberry]

my sentiments exactly Fresh...that is a great idea Amelia. Thank you for the input!

[ltrain823]

This is all great information, I am getting a very large refund as well ($11,000). My atty said that I can apply it all to the principle of my mortage since i have no equity. Does that sound right? I live in Michigan and supposedly there are a lot of exemptions. If I fall into these exemptions do I still have to have proof of how i used the money?

I hope this wont be wrong to ask but I was hoping to putting the money aside in a safety deposit box because I am expecting to get married in the next couple of years. I was doing the math with my expenses and whatever the Ch. 13 payment is going to be and it seems as if I will never be able to give my wife even a half way decent wedding. I want to be able to cover most of the expenses that come up in a wedding (ring, dress, invitations, honeymoon, etc.) My gf is a very understanding person and although she would love the perfect wedding, I know she will understand if I cannot provide that. I still want to TRY to make it as memorable as I can afford and this seems like it could really be the solution. Does anyone have an "friend to a friend" advice about how to handle this? I apologize if it sounds like I'm trying to beat the system, I hate feeling guilty about anything and I think personally, this is a legitamate reason for me. Thanks again if you decide to provide any insight...i really appreciate it.

[ssdsco]

This is all great information, I am getting a very large refund as well ($11,000). My atty said that I can apply it all to the principle of my mortage since i have no equity. Does that sound right? I live in Michigan and supposedly there are a lot of exemptions. If I fall into these exemptions do I still have to have proof of how i used the money?

I hope this wont be wrong to ask but I was hoping to putting the money aside in a safety deposit box because I am expecting to get married in the next couple of years. I was doing the math with my expenses and whatever the Ch. 13 payment is going to be and it seems as if I will never be able to give my wife even a half way decent wedding. I want to be able to cover most of the expenses that come up in a wedding (ring, dress, invitations, honeymoon, etc.) My gf is a very understanding person and although she would love the perfect wedding, I know she will understand if I cannot provide that. I still want to TRY to make it as memorable as I can afford and this seems like it could really be the solution. Does anyone have an "friend to a friend" advice about how to handle this? I apologize if it sounds like I'm trying to beat the system, I hate feeling guilty about anything and I think personally, this is a legitamate reason for me. Thanks again if you decide to provide any insight...i really appreciate it.

Well, the wedding will be a lot cheaper from a jail cell and will certainly be memorable. Seriously, you don't want to hide your tax refund. It's easy to track and hiding it is fraud.

Sounds like you have a large homestead exemption. Perhaps you can pay down the principal now and draw on that money after BK. Perhaps there's other exempt assets such as retirement accounts you can park the money in until after BK.

[SUB]

A attorney "hypothetically suggested" we live off our refund/rebate, and file later on.

Seems like you wouldn't want to create any more equity that would effect exemptions.

[FreshLikeADaisy]

Ltrain, be aware that Form 7 (Stmt of Financial Affairs) in your filing asks specifically about your ownership of a safety deposit box, etc. I would not recommend hiding cash in it.

Basically, I question your atty's advice to build equity in your house that you will just have to turn around and exempt; you could leave the $11k in a bank account and wave it under the trustee's nose, if you have that much in exemptions to cover it. As I mentioned to Tallberry, your best bets are paying down non-dischargeable debt (taxes, child support, school loans, etc) as well as buying essentials and investing some in accounts that are already exempt in bankruptcy (like an IRA).

What you definitely want to AVOID are any luxury or asset purchases (for instance, pre-bk is not the time to get that lovely engagement ring for the fiancee; trustees have been known to sieze them as assets). No cruises, no day spas, no gold coins, you get the picture. Personally, I kind of have to wonder how it is you're looking dead into the eyes of a Chapter 7 and don't have a ton of long-needed necessities to spend it on, but that's just me.

I think you would be well served by going back to that atty and asking specifically what you can do to convert this into exempt assets (like an IRA) without having to use exemptions for it. I also think you should question him carefully about timing your wedding and/or honeymoon with regard to your bk, as much as "luxury" purchases can be involved in a wedding (travel, jewelry, recreation spending, etc) and those purchases, depending on timing, can get your Ch7 dismissed. It may actually be in your best interest to *wait* a few months before you file. Be sure your atty explains to you what the rules are regarding the types of purchases you can make pre-bk, because you really need to understand them if you're planning a wedding too.

In any case, make sure that whatever you do with it is legit and aboveboard, and keep your receipts; if you get your Chapter 7 dismissed because you failed to list assets, that's only the beginning of your troubles. In other words, make sure your local jail (and your fiancee!) allows conjugal visits. Good luck!!!

[ltrain823]

Basically, I question your atty's advice to build equity in your house that you will just have to turn around and exempt; you could leave the $11k in a bank account and wave it under the trustee's nose, if you have that much in exemptions to cover it. As I mentioned to Tallberry, your best bets are paying down non-dischargeable debt (taxes, child support, school loans, etc) as well as buying essentials and investing some in accounts that are already exempt in bankruptcy (like an IRA).

Fresh, thank you so much for taking the time to respond. I am still very familiar with how exemptions work and maybe you can answer this for me. It says that I have $31,900 in homestead exemptions. I owe mortgage balance is $255,000 and I just checked zillow.com and it says the zestimate is $230,000. Does this mean I have more than the $31,900 of exemptions since I have negative equity? You said as long as I have enough in exemptions I can wave the $11,000 in the trustees face (I appreciated the humor by the way). Does this mean he/she cannot touch it because I have enough exemptions? If you have enough exemptions, do you still have to show how you spent it? I am filing a Ch. 13

[PaKettle]

... I am filing a Ch. 13

I suggest you ask this and further questions in the Ch. 13 forum... just so as not to confuse people and perhaps get answers based on a 7 when you need answers oriented towards a 13!

[FreshLikeADaisy]

Pa, thank you for catching that; I missed the reference that Ltrain was going for a Chapter 13. Should have read more carefully! (And congratulations on your discharge!!!! YAAAY! )

Ltrain, exemptions only matter in a Chapter 7, where any non-exempt assets are seized by the trustee for sale and the proceeds used to pay off your creditors. In a Chapter 13 payoff plan, exemptions don't matter. But to answer your question hypothetically, if you were filing a Chpater 7, nope, negative equity doesn't count for squat. And if that homestead exemption is limited solely to homestead equity (many states allow you to use a certain portion of *unused* homestead exemption as a wildcard, i.e. to apply to whatever you want, including cash in the bank, but it varies by state) then if you have no equity, and by state law can only use it for homestead, you don't get that $31,900. You pretty much have to use an exemption for what the law says you may, and if you don't have that particular asset you don't get to use that exemption. Good luck with your Ch 13!

[lrprn]

In a Chapter 13 payoff plan, exemptions don't matter.

Not so, FLAD. State and federal exemptions matter just as much in Ch 13 too.

Here's how Cathy Moran, a well-known and highly regarded bankruptcy lawyer from CA explains it - http://www.moranlaw.net/exemptions-13.htm

"Exemptions in 13 are used to determine whether the plan complies with the requirement that a Chapter 13 plan must provide creditors at least the equivalent of what creditors would have gotten had the debtor filed Chapter 7 (the "best interest of creditors test").

Thus, to apply the test, the trustee calculates what property would be available for liquidation to pay creditors after the exemptions are deducted from the assets if the case were a Chapter 7."

[FreshLikeADaisy]

Oh, Lrprn, thank you for the correction! I had no idea...

Teach me to go talking about 13s... thank you for the catch!

[butterflywings]

Pre BK planning is fully acceptable. Paying down the principle of your mortgage is allowed.

http://www.nywb.uscourts.gov/in_re_martiny_3229.php

Here is a case where a trustee objected to the debtor's pre BK planning, and the judge sided with the debtor.