How to spend tax return?

[lindsay2181]

I have been waiting for our tax return so that I could use some for attorney fees. I was hoping we'd get enough for attorney fees, turns out we are getting more than I expected ($3700) so......if I used about $1500-$2k for attorney fees....what to do with the rest? We NEED stuff for the house, groceries, etc. and I see people posting here they do that and save all receipts? What about putting a little (a couple hundred) into my son's savings account, would that fly? What about paying for a years' worth of Dish Network, would that fly? (We don't even have cable now but DH feels he should get SOME kind of treat for working hard all year. He wants a $600 tv but I told him I don't think we could get away with that....but maybe we can have decent channels on our old crappy tv?) I owe my dad $300, if I pay him back do I need him to write me a receipt showing it? Can we pay a couple months' ahead on our lot rent (we live in a trailer park). What's "allowed?" I mean, I'm sure the CA's would love to have it but what's the point to pay them if we are going to file?

[JEM]

I would not pay back your dad. Paying back friends and relatives before filing is not a good idea.

I probably wouldn't pay up a year's worth of Dish Network either. That might look too much like a luxury.

You'd be better off paying up a few extra months of lot rent, or auto insurance, pay an extra month of your water bill or utility bill.

[LizardTail]

Thanks for those suggestions JEM. I think that's what I'll do. Pay up the utilites some. I will probably be filing this month. I used just under $500 to buy a computer today, but paid in cash. My other one was 10 years old. I don't have tv or cable or a home phone so I don't think this is a luxury since I got laid off last week and need a computer to job hunt.

[lindsay2181]

hmm well, my dad let me borrow $300 that he needed to pay his OWN bills....i needed to pay my car insurance or it was going to be cancelled. so i promised him i'd pay him back asap. he is hoping to get it back by wednesday when my husband gets paid. i don't really have a choice NOT to pay him, don't want to make him late with HIS bills ya know?

[backtoschool]

Any money you pay your family at this point will be considered a preferential payment and the trustee will go after the family member for it.

I would spend the refund on necessities like food and clothing, utilities, etc. Since a portion of the refund is unexempted, I would not buy any luxury items with it (like a flat screen television.)

[momofthree]

There's a good chance that if you pay that money back to your dad, the trustee will come take it back from him, so you'll both be out the money. Can you buy his groceries for the month or something instead?

[BananaCabana]

Appliances?

Our fridge is dying a slow and painful death. Spoiling food one week then working another week with a continuous yet varying cycle. I need to get another one with our tax refund but wonder if purchasing a new one would be considered a luxury. Granted it is a neccessity but when one can purchase a refurbished one would a trustee consider a new one a luxury item? If so then I will be sending all the children to the dentist and doctor with our refund. Those are certainly not luxuries......right?

[BKDefender]

The trustee has the power to go after preference payments in a consumer chapter 7 case where the payments are $600 and over during the 90 days (or 1 yr if an insider, and your dad IS an 'insider') immediately preceding the filing of bankruptcy. If it's not $600 or over during that 90 period (or 1 yr for your dad an 'insider') then the trustee is explicitly prohibited under 11 USC 547(c)(8) from voiding the transfer.

So if you have not paid your dad more than $600 in the past 1 yr for a debt, then the trustee is not legally entitled to force your dad to pay it back.

If your fridge is dying then you should not have a problem buying a new refrigerator. Also, a dentist and doctor visit are not luxuries unless it's for something like elective surgery for veneers or something.

You also should know that most states exempt Roth IRA accounts, meaning you could take up to $5k/filer and put it in a Roth IRA to save it through bankruptcy. It'll cost you ~10% in penalties if you withdraw it within 5 yrs but you don't have to waste or blow the money, you can save 90% of it through BK. Ask your attorney about that exemption.

--William

[backtoschool]

Our fridge is dying a slow and painful death. Spoiling food one week then working another week with a continuous yet varying cycle. I need to get another one with our tax refund but wonder if purchasing a new one would be considered a luxury. Granted it is a neccessity but when one can purchase a refurbished one would a trustee consider a new one a luxury item? If so then I will be sending all the children to the dentist and doctor with our refund. Those are certainly not luxuries......right?

Buying a refrigerator should be fine. Basic appliances like refrigerators are not considered luxuries.

[BananaCabana]

Thank you for the replies. I have been putting the purchase off and using coolers from time to time as I really didn't know how it would be viewed in a BK. I am not looking to buy a $3000 fridge but a $1200 would be nice. Still a refurbished one is only around $4-500. I know I am making myself sound really intelligent right now...I really am smarter than I type.

We are filing in FL. Do the BK courts really allow shoving a bunch of money into a Roth IRA? I know you are not hiding the money when you do that but couldn't they see that as a consumer avoiding paying creditors by "hiding" it in an IRA? If I were to deposit money into our IRA I wouldn't take it back out. Yet I have steered away from putting money into ours for the reason mentioned above. I was afraid they would look at me, sneer and say...."You can't pay one of your creditors but you can pay yourself in money that you know we can't touch?". I hate to be so paranoid but I don't want to make any stupid mistakes. I could almost see that as being a preferential payment to yourself. The real question is how would a FL BK court see it?

[lindsay2181]

ok, i owe my dad $300, so i should be fine then, since it's less than $600? i mean, there's no way I can just not pay him back, he doesn't need $300 in groceries, he needs $300 cash to pay his bills. If they wanted to see the check, the bank could show them, he wrote me a check for $300 last week, I deposited into my account, paid my car insurance, and now I need to write him a check back for the exact $300. i was hoping that wasn't a problem...if so I would just have to wait to file BK. I hate borrowing money from my parents and don't want to have any excuses about not being able to pay them back.

Still need to sit down with my husband and get it through his brain that we NEED to file BK. i don't want to be drowning forever!

[OhioFiler]

Buying a refrigerator should be fine. Basic appliances like refrigerators are not considered luxuries.

This may not be true in the Northern District of Alaska.

[backtoschool]

Thank you for the replies. I have been putting the purchase off and using coolers from time to time as I really didn't know how it would be viewed in a BK. I am not looking to buy a $3000 fridge but a $1200 would be nice. Still a refurbished one is only around $4-500. I know I am making myself sound really intelligent right now...I really am smarter than I type.

We are filing in FL. Do the BK courts really allow shoving a bunch of money into a Roth IRA? I know you are not hiding the money when you do that but couldn't they see that as a consumer avoiding paying creditors by "hiding" it in an IRA? If I were to deposit money into our IRA I wouldn't take it back out. Yet I have steered away from putting money into ours for the reason mentioned above. I was afraid they would look at me, sneer and say...."You can't pay one of your creditors but you can pay yourself in money that you know we can't touch?". I hate to be so paranoid but I don't want to make any stupid mistakes. I could almost see that as being a preferential payment to yourself. The real question is how would a FL BK court see it?

Putting money into an IRA right before filing is technically allowed, but it raises a red flag to the trustee.

[backtoschool]

This may not be true in the Northern District of Alaska.

Now that made me laugh.

[backtoschool]

ok, i owe my dad $300, so i should be fine then, since it's less than $600? i mean, there's no way I can just not pay him back, he doesn't need $300 in groceries, he needs $300 cash to pay his bills. If they wanted to see the check, the bank could show them, he wrote me a check for $300 last week, I deposited into my account, paid my car insurance, and now I need to write him a check back for the exact $300. i was hoping that wasn't a problem...if so I would just have to wait to file BK. I hate borrowing money from my parents and don't want to have any excuses about not being able to pay them back.

Still need to sit down with my husband and get it through his brain that we NEED to file BK. i don't want to be drowning forever!

The trustee will look at the total of your payments to your parents in the last year. If they add up to more than $600 then the trustee will probably go after the money. That is what happened to me. I became a $1,000 asset case due to two $500 payments to my mother to help her with her bills. Each check was under $600 but the total for the year was over $600 so they went after me.