cash assets

[ndebt2009]

some info

My wife and I are in the process of filing chapter 7
we have mega credit card debt +100k
We owe more then 100k over what are house is worth.
We had been struggling to stay afloat..
My career is in the toilet for awhile - I'm in the construction industry.
My wife's job is solid with benifits ..

We've been thru Credit Conseling and have certificates.
We've research several attourney's and have settled on one.
We've quit paying Credit Cards, Mortgage, HELOC, prop taxes, HO ins, etc
We've finally have had our first face to face meeting with atty after about 2 month's of research.

After our face to face it appears that we have an excess of cash assets for chapt 7. About 20k in cash in personel and business accts, 7k in whole life policy and another 2k in stock.
We were instructed to dump the cash before we file on assets like cloths, furniture ,wide screens, golf clubs and other stuff ... essentially go on a buying spree.Which is fine except we'd rather keep the cash and begin acruing for a future home down-payment.

Furthermore, Because we haven't been paying off any creditors for about 2 months now, we essentially have no bills and our cash assets are increasing 3-4k per month.

Our 3 kids go to privite school at which we recieve copious amounts of financial Aid. Since we have not been paying our debtors i was able to pay them april and may tuition on may 7th of 6k. Our attourney suggests that this was a payment of "preference" and is suggesting that we file 3 months after the date of this payment. Becuase of this we won't file now till 8-8-09 or there abouts. This means that we'll need to spend an add'l 6-8k of cash by then as well.

Since My wife and I both work full time, our 3 kids are enrolled in summer camp which demands payment in advance - 9k for the summer.

Questions:
1. Will the original 6k be concidered a payment of "preference"?

2. Will the 9k for Summer camp be concidered a payment of "preference"?

3. Besides the spending spree ... what can we do?

Thanks in advance

[ready2puke]

Wow Not sure what to say...can you exempt your cash? Also after you go on that fun spending spree your going to have to exempt all those goodies anyway...How about putting some in an IRA?
Love to hear others thougths on this one. Kinda wish I had that problem

[cwilliams]

I would say don't spend it on "stuff" per se but maybe things like car repairs, clothing (nothing extravagant), maybe some other things you've been putting off doing, stocking up on groceries, stuff like that. I think anything purchased that costs over $600 maybe considered a luxury item. I'm not sure where I read that, maybe in the 341 questions. So I would hold off on the flat screens and golf clubs.

I'm like ready2puke, I also would love to have your problem.

[ndebt2009]

We are not getting much assistance with our Atty.
He doesn't return calls, reply to emails, etc.
We are beginning to look for another ...

Would it be to our benifit .. considering above .. to do Chapter 13?

[OKBK]

You should have planned ahead further. No one knows how much cash is in your pockets....

[music12]

given that you have 3-4k per month left over, are you certain you can really file chapter 7? it sounds like you could repay a chunk of this debt in a chapter 13.

[OregonMom]

I am thinking you could avoid bankruptcy all together and liquidate everything, cut out the summer camp and private schools and be ok. From my math it looks like you could come up with $50k easy to cut down on that credit card debt.

[Bankruptcy20]

I'm fairly surprised that your attorney viewed tuition as a potential preference payment. This isn't the forums to debate public or private education, but if you opt for private, then it's your choice.

Paying your landlord for an apartment is generally not deemed a preferential payment... Paying your grocery store for food is generally not deemed a preferential payment. Paying a hospital for emergency room care is generally not deemed a preferential payment.

Maybe your situation is different due to the financial aid package you may have received, but if you have an "invoice" to pay tuition and you did so (your $6k), I don't see the issue.

By the way, I am not a lawyer, but I spoke to several attorneys about this issue, as my children are in private school, and this was never an issue. You should get a second opinion on this tuition issue with an attorney in your state.

If you hear otherwise, perhaps you can post back.

[music12]

i agree with bankruptcy20.

a tuition payment is not a payment of a debt. it's an exchange of money for services rendered.

even if you were to give money to an insider (relative), as long as you got something in return that's of roughly equal value, it's neither a transfer nor a preference. for example, if you pay your mother for babysitting your kids, that's ok, not a preference and not a transfer. but if you owed her for babysitting 3 years ago and suddenly paid it all back, that's a preference. these things are not an exact science...

[ndebt2009]

Great comments all and thanks ...

one last questions though ... August 1st we willk be invoiced for the 09-10 school year which we can pay monthly, semi-annually, or all in advance.

Paying all in advance will definately bottom us out hence put us under the exemption however we will be paying for future services to be rendered. Although this appears to be like paying a relative to babysit I'm concerned a trustee may not agree. What do you think?

[DeadManCrawling]

What state are you in?

I may have missed it, if you already said.

This is VITAL to any planning or advice.

[Cheeseater]

I don't see how your tuition would be considered a preferential payment. They are recurring expenses; likewise paying them all up front won't change how your monthly expenses are figured. Private tuition is capped at $300 a month in my state but yours may be different. Do you have a business in your name?

If you file a 7 your stock, whole life and cash will go to the trustee. Are you planning on giving up your house? Are you over the median income for your state?

From just your first post I'd guess you looking at a 13. Good luck

[CH33 Paralegal]

with that much cash hanging around, you're not at the point where you need a 7. Flat out. Get by as long as you can on that money until it isn't there. Spend it on life, not on toys.

also, "summer camp" and "private school" don't go over well in a 7. You might be required to show the true NECESSITY of that very school and that very summer camp.

[ndebt2009]

First - thanks for everyones comments

We live in Illinois.
We quit paying CCards and Mortgages and Heloc 2 mths ago.
These interest payemnts and minimums on the CC's were in excess of 6k/mth
On our income v expenses this made us 2-3k in the hole every month till we bottomed out - 2 months ago.
We hope to file in early sept. - about 3 months from now.
Without the payments above we - no CC's, heloc, or mortgage - we net about 3-4k mth except for "camp" which is our summer day-care for 3 kids and tuition. So not only do we have to spend the cah in the bank but we need to spend another 12k by Sept 1.

It's "not" a good position to be in. WE hope to have a down payment for a house sooner then later to take advantage of the market and rates.

We need to spend this cash wisely in order to "do that".

So Spending this cash on Day care and tuition makes sense.

Also, to minimize cash on hand, my wife can increase her 401k deductions on her paycheck up to 18% per pay period. This will minimze out net gain per mnth but permenently invest that cash into retirement which is OK if we can do it.

Comments?

[Cheeseater]

The median for your state for a family of 4 is $77,634 +$6900 for each additional member if you are under that gross you golden. Pay your tuition up front unless you pay a ridiculous amount, say 2 years, you should be fine. Are you going to buy your new house before you file?