Am I in trouble if I do this ?

[broke20]

I filed chapter 7 bk on March 12, 2010 and I filed my 2009 tax return on 2/10/2010. I did not cash my federal tax return check until today 3/16/2010. After I cashed it to pay living expenses I got home and went to the mailbox and had gotten a letter from the federal bk court listing what I need to bring and the date of my hearing April 12,2010. One of these letters stated I was not to dispose of any property including cash without written authority of the Court. Am I in trouble for cashing my tax refund check today 3/16/2010 and spending it? Because I had filed my federal 2009 tax return on 2/10/2010. But I am not sure if this will cause a problem. My tax return check was 3500.00 and I had gotten it in the mail on the 2/19/2010 and the check was dated 2/11/2010, but I didn't cash the check til today 3/16/2010. I don't know what we will do if we have to pay this money back to the trustee. Please help and thanks for any advice. Our lawyer awhile back in Feb. told us to use the federal tax return money to pay for living expenses, but we didn't cash the tax return check til today 3/16/2010 . We are scared to death. Thanks !

[backtoschool]

Since you put the check in the bank after you filed, it is property of the bankruptcy estate. This could definitely cause you a problem with the trustee, who will be looking at your tax return and will most likely want the refund. If the trustee wants the refund, he will make your case an asset case and you will have to pay him the money back. He will most likely make arrangements with you.

In order for your refund to be safe, your attorney can use any wildcard or cash exemptions to exempt it on the petition if you have any exemptions left. If your attorney has not done that yet, then you will need to amend your petition.

When your attorney told you to pay expenses with the check he meant before you filed. Once you file, if the refund is not exempted it is property of the court until you are discharged and closed.

[BobMango]

If you have any room left on your wildcard you could amend your filing to protect it. I believe you have a wildcard for any property up to $6K for head of family in SD.

[justbroke]

As Bob writes, first try to exempt the cash, if allowed in your State. If not, be prepared that the Trustee will probably want that money. You'll have to come up with some payment plan in order to pay it back. Hopefully you will be able to work with the Trustee through your attorney in order to smooth things over.

Your attorney should have drilled into your head that you can't spend or sell anything that you had "prior" to filing, and that includes a tax refund. I wouldn't be "scared", but you might be required to pay it back. Trustees usually will give you one year, on a payment plan, to pay it back. Please work with your attorney.

[broke20]

Thank you all for the advice. We will check with our lawyer about exemptions. Our lawyer had told us in Feb. to spend the tax return on living expenses but we didn't ask him if that was because he was going to exempt it. Actually we had gotten a mailed check of our tax refund and we cashed it and paid cash on our living expenses rent, food, etc. I am glad you all let us know about the outcome of this thanks again

[broke20]

Too late terrible news spend your federal return before filing

I filed chapter 7 bk on March 12, 2010 and I filed my 2009 tax return on 2/10/2010. I did not cash my federal tax return check until today 3/16/2010. After I cashed it to pay living expenses I got home and went to the mailbox and had gotten a letter from the federal bk court listing what I need to bring and the date of my hearing April 12,2010. One of these letters stated I was not to dispose of any property including cash without written authority of the Court. Am I in trouble for cashing my tax refund check today 3/16/2010 and spending it? Because I had filed my federal 2009 tax return on 2/10/2010. But I am not sure if this will cause a problem. My tax return check was 3500.00 and I had gotten it in the mail on the 2/19/2010 and the check was dated 2/11/2010, but I didn't cash the check til today 3/16/2010. I don't know what we will do if we have to pay this money back to the trustee. Please help and thanks for any advice. Our lawyer awhile back in Feb. told us to use the federal tax return money to pay for living expenses, but we didn't cash the tax return check til today 3/16/2010 . We are scared to death. Thanks !

We checked with the lawyer today and we should have spent our federal on living expenses BEFORE we filed bk. When our lawyer had told us to spend it in FEB. he didn't tell us we had to BEFORE we filed bk, he just said spend it on living expenses nothing more. Our lawyer told us its now up to the trustee what he wants to do with it and chances are he'll want it. Our advice is to everyone spend your federal on living expenses BEFORE you file. Our lawyer could not amend ours for exemption because we had used up all of our exemptions. BEWARE of this.. $ 3500.00 gone and we both are unemployed and in this economy

[justbroke]

Spending your return prior to filing is a standard piece of advice from attorneys, unless you're in a generous State like California (using System 2 and having no homestead). Truly sorry and sad that your lawyer wasn't "specific" and that you learned the hard way.

For what it's worth, you should be able to pay it back over the term of 1 year. I wish you the best.

[broke20]

Spending your return prior to filing is a standard piece of advice from attorneys, unless you're in a generous State like California (using System 2 and having no homestead). Truly sorry and sad that your lawyer wasn't "specific" and that you learned the hard way.

For what it's worth, you should be able to pay it back over the term of 1 year. I wish you the best.

Thanks much We will have to try and pay it all back from unemployment for now and maybe from a job if we can find one later on. I wanted to thank you all for your care and support