Look Back Period

[spearmint]

I am about to file Ch7 but over the next three months its possible I may receive money from a lawsuit settlement. What would happen to the settlement funds?

[helpinfla]

The proceeds from the suit are legally part of the bankruptcy estate and if done by the book would be distributed by the trustee to the creditors.

[spearmint]

What do you mean "if done by the book"? Are there ways around it?

[spetkovich]

It depends on WHY you're going to get the money, and the exemption laws in your state. For example, if your claim was a workers comp claim, many states exempt any workers comp awards 100%. Personal injury is often NOT exempted (though I'm not sure about in every state).

Unless exemptable, any money that you have the right to receive at the time your bankruptcy is filed is considered property of the estate. Essentially, because whatever events giving rise to your claim occurred pre-petition, any proceeds of the claim are also pre-petition and thus subject to administration.

The short answer: you have to get the money, and spend it, prior to filing, or you risk the Trustee compelling turnover of the assets. Consult an attorney regarding exemption issues.

[spearmint]

Gosh - that's easy! I can spend it on a vehicle. My car is about to bite the dust!

Does it matter WHAT I spend it on or just that it's spent?

[spetkovich]

Make sure you put it into an asset that's going to be exempt in bankruptcy. For example, if you buy a $10,000 car and your state only exempts $1,000 per debtor for motor vehicles, you'll face a whole different problem with over-exemptions.

As long as you put the money into an exempt asset that is reasonably necessary for the health and well-being of you or your dependents, you should be fine.

[spearmint]

Make sure you put it into an asset that's going to be exempt in bankruptcy. For example, if you buy a $10,000 car and your state only exempts $1,000 per debtor for motor vehicles, you'll face a whole different problem with over-exemptions.

As long as you put the money into an exempt asset that is reasonably necessary for the health and well-being of you or your dependents, you should be fine.

How can I find out what the Michigan exemption for a vehicle is?

What would happen if I buy a vehicle that costs over 10K

That would take care of some of it. Wonder what I could do with the rest?

[AngelinaCat]

I am about to file Ch7 but over the next three months its possible I may receive money from a lawsuit settlement. What would happen to the settlement funds?

You need to look at the LOOK FORWORD problem. You are talking about a hypothical possible lawsuit settlement or payout. Be aware that you WILL be asked at your 341 if you are expecting any settlements or payouts from a lawsuit.

We were asked the same question--no we didn't--but we were also asked if we expected an inheritance within the next 180 days from the date of our 341. We didn't expect anything there, either, but I would be willing to bet that that, '180 days from date of the 341,' will also apply to your situation.

Good luck.

[spearmint]

You need to look at the LOOK FORWORD problem. You are talking about a hypothical possible lawsuit settlement or payout. Be aware that you WILL be asked at your 341 if you are expecting any settlements or payouts from a lawsuit.

We were asked the same question--no we didn't--but we were also asked if we expected an inheritance within the next 180 days from the date of our 341. We didn't expect anything there, either, but I would be willing to bet that that, '180 days from date of the 341,' will also apply to your situation.

Good luck.

Thanks Angelina. I will keep that in mind. I had no idea there was a look FORWARD time frame. In my case, I would estimate I would get the settlement before the 341.

When does the 341 actually occur? I thought it was about two months after filing but I am not sure.

[spetkovich]

Angelina: The 180-day timeperiod applies ONLY to the proceeds from life insurance proceeds, will contest proceeds, devises or inheritances. It does NOT apply to other after-acquried property.

Regardless, if the OP acquires the settlement proceeds pre-petition and spends them on exempt property pre-petition, the dilemma raised re: after-acquired property does not apply.

Spearmint: Try googling it

[spearmint]

Angelina: The 180-day timeperiod applies ONLY to the proceeds from life insurance proceeds, will contest proceeds, devises or inheritances. It does NOT apply to other after-acquried property.

Regardless, if the OP acquires the settlement proceeds pre-petition and spends them on exempt property pre-petition, the dilemma raised re: after-acquired property does not apply.

Spearmint: Try googling it

I just did. The fed exemption for a vehicle is about $100 more than the state exemption - about $3200. Does that mean I can only have a vehicle with that much equity? I wanted to take 10K of the settlement and buy a vehicle CASH so no payments. However, that would mean I would have 10K equity. Would I have to pay 10K less 3200 to the trustee???

How can I find out what the other exempt items are so I know how to spend it? I need new carpet and some new appliances (oven quit and I need a new washer and dryer) but I don't know if I can spend it on those things.

[bobbyquefour]

You need to look at the LOOK FORWORD problem. You are talking about a hypothical possible lawsuit settlement or payout. Be aware that you WILL be asked at your 341 if you are expecting any settlements or payouts from a lawsuit.

We were asked the same question--no we didn't--but we were also asked if we expected an inheritance within the next 180 days from the date of our 341. We didn't expect anything there, either, but I would be willing to bet that that, '180 days from date of the 341,' will also apply to your situation.

Good luck.

I thought it was 180 days from the date you filed, not the 341?