Money received while in or shortly after a 7

[krielly]

I'm in a Chapter 13, and old law at that, so I really know very little about Chapter 7.

I just learned that my sister's mother and father in law filed C7 recently and was relieved for them, as I know they are struggling, and she has been working 2 jobs for a long time. Anyhow, I just learned last night that they are expecting some sort of insurance refund. He was recently hospitalized for brain surgery, and I guess it has something to do with an overpayment or something. I don't know any of the details.

At any rate, sounds like this check will be around 9K!

I don't know how they could possibly keep this, as I would think the trustee would be all over it! I'm concerned that they will spend it, and get themselves in trouble somehow. They are not discharged yet, and are still in the waiting period. It's a tough situation, because they don't know I know, and this information about the check was shared with me in confidence (my sister doesn't even know that I know about this).

Thoughts from those of you who know the ins and outs of 7 would be appreciated. Thanks!

[erinmi]

The main question is:

1. Did they know they were going to get the money when they filed?

If they knew and didn't say anything, they will likely have to turn it over to the trustee.

If it is totally unexpected, then they may be able to keep it.

Our trustee asked us if we expected any inheritance/windfall of $10,000 or more in the next year. Since this is less than that, they may not consider it a "windfall" but I don't know on the technicality of the amount since they do take tax refunds sometimes.

And technically, it is only 180 days after you filed that you have to report any "windfalls".

[krielly]

They just filed in the last month - month 1/2.
I don't know whether or not they knew about this when they filed, but I got the impression they didn't.
How do trustees find out about these types of things?

[iloveoliver]

Fling and lump sum

My ? is concerning filing and receiving a windfall at the same time.
So, is filing, the actual date you meet with the trustee?

When are you considered to have filed? I received a notice of chapter 7 bankruptcy case, meeting of creditors and deadlines. Is this a filing?

I applied for SS disability last August and never expected. The day prior to "filing" I received a lump sum from the SS for back pay from the original date I was disabled. More than $25,000.


I had no idea I would be approved.

Now I have changed my mind about going through this and negotiating with each creditor.

I'm really confused about this.

[FreshLikeADaisy]

Kreilly, their best bet is to let their atty know, because their atty will have a much better idea what the trustee is likely to do in their area.

When they deposit that check, the trustee can find out about it. I do not think it's wise to try to hide it.

What they can do is talk it over with the atty, and *amend* their schedules to declare it and exempt it with any remaining exemptions they may have. They may be able to keep some or even all, depending on their state and what they have already exempted.

But I would NOT recommend trying to hide it. In the end, their debts will be discharged in a Ch7 anyway, so if their debts are significantly higher than $9k anyway, they're STILL winning even if the trustee takes it all. They would be wise to take the long-term view on this and not jeopardize having their discharge overturned if at some point in the future the trustee finds out about it. That's my opinion, at least. Good luck!!!

[FreshLikeADaisy]

Iloveoliver, this isn't a good situation. I'm very concerned about you moving forward and dropping the bk in favor of negotiating with creditors if you don't have a clear idea of everything that is at stake. You REALLY need to be clear on the ramifications of what you're doing.

I'm not saying this to chastize you, only to encourage you to get the legal advice you desperately need before your decisions are set in stone. I have to be honest and say that someone in your position makes me really uncomfortable for them when they say they don't understand. Even if you have to fire this atty and get another one, you REALLY need those answers... like yesterday! Please allow me to encourage you to continue working on getting some solid and CLEAR legal advice before there's no longer any time to change your course.

I wish you all the best!

[danaf]

iloveoliver - I'm with freshlikeadaisy on your situation. If you are disabled, unable to work, and receiving disability pay - you are entitled to discharge your debts. And you should - because you are on a fixed income with little or no opportunity to make more....why negotiate, why pay at that point? 25k is not going to last long for a person who is disabled and you will need that for meds, living expenses- whatever. I think that disability income needs to be included in the means test and schedules but otherwise it may be exempt. I really think you should go forward with your ch 7, but you just need to ammend the schedules ect. Either consult a lawyer about this or do the research. If you choose to go foward, you definately need to disclose this to the trustee - and definately should ammend your paperwork to show what you received. And I'm really with freshlikeadaisey - in your situation, consulting & hiring a lawyer would be best - it would be worth the money and save you the stress.

[iloveoliver]

FreshLikeADaisy & danaf

That was one alternative I considered. I haven't made any decisions. I talked to my atty this am and he still hasn't found anything concrete to argue with yet. I guess that is what you might call it. I have seen other places where SS disability is considered exempt UNTIL it hits your acct.

I am so confused. I'd like to speak to another atty but don't know how to go about it. Will I find anyone else willingly to talk to me?

So many ?'s

I'll keep plugging away.

I talked to another atty's office and was told that my atty was correct that the ssd is not exempt. She said I should let the case be dismissed and refile in six months. So that's what I am going to do.

[FreshLikeADaisy]

Iloveoliver, seems to me you need a straight answer from your attorney on what the case law is *in your area* regarding a SS payout.

This whole thing -- SS disability being considered exempt UNTIL it hits your acct -- basically make the recipient unable to possess or use the income, so I have to be honest and say that makes no sense to me. I'm also surprised your atty, in saying that this is non-exempt income, hasn't discussed legitimate ways of making it exempt as an option for you.

But if you're clear on it, that's what counts. My concern is that you have *already filed*, and while you can just let your case be dismissed, it won't be as though this filing never occurred. If/when you file again, the income will show up in your banking history, as will the dismissed bk, and you may find yourself in a position of having to explain this to the trustee, especially if you rack up any debt in the meantime that you intend to discharge in the bk. My concern for you is that allowing this dismissal to happen in tandem with a SS payout is not going to look good in any future Ch7, especially if you only wait six months to file and/or accumulate further debt in the meantime.

So far you've spoken with two attorneys from what you're saying, so if you feel like you have received everything you need from them and clearly understand what is going on, that's great. But if you don't truly understand your options please let me encourage you to keep at it until you do. From what you write, when you speak with the attys it's as if you're kind of bouncing from one tidbit of info to the next without really understanding what they're saying and why they're saying it.

I really am concerned for you, but because *you have already filed* and are now under the time limits involved in a Ch7, I think you need legal advice from a professional that you *clearly* understand. It's your own future on the line here. But your last line indicates that you've already decided to allow your case to be dismissed, so I'm going to bow out now. I just wanted to make sure that you at least know that there's more to it than what you say has been indicated to you by the two attys you have spoken with, and encourage you to not let it go until you are crystal clear in your understanding. Good luck!!! I wish you all the best.