Cash Stash

[dmu]

My husband and I intend to file Chp 7 in Jan. 2011. Currently, we have more cash than we can exempt sitting in a money market account. Can we withdraw this cash and use it/stash it so that it will survive the bankruptcy process? Is the trustee only interested in transactions that took place 90 days preceeding the filing or do they go back farther than that? Does this same general rule apply to credit cards as well? Would I be shooting myself in the foot if I used a credit card in July and filed bk in January?

Secondly, is there a way we can protect any potential tax refund we may receive. If the tax refund can be exempted, it seems like we'd be able arrange our cash so that we leave enough room under the exemption cap to cover our tax refund. I just don't know if: 1) the income tax refund can be exempted, 2) if so, can it still be exempted if you receive the refund after you file.

Thanks for any help any of you can provide.

[JackBondLove]

Sure, you can do anything you want - it's a free country! And the trustee can have your case dismissed for fraud, and possibly recommend that you be prosecuted for perjury.

[keptdigging]

No no no... you don't want to do any of that. First: the 90 day rule is just a burden of proof thing. If you know you're filing bk than any CC usage is fraudulent and no dismissible (outside of 90 days the creditor has the burden of proof... but the creditor can go back as far as they want.)

You can "arrange" your cash sometimes... but never by hiding it. Stashed cash is an asset wherever it is... including under the mattress... and you'll leave a trail a mile long. They can look back as long as they like.

First arranging you can do: DON'T USE ANY MORE CREDIT. Pay for things in cash. You've got cash, use it.

Second arranging thing you can do: You can spend down that cash on certain things. Fund your retirement fully, buy things you need (and by need I mean NEED.) A lot of us who are about to file have been putting off a lot of things (in my case it was dental work and a leaking roof.) The actual principle is: If you spend money because you needed something, that's okay. If you spend money to keep it away from the bankruptcy trustee, that's not okay, and in fact jeopardizes your whole discharge.

You need to assume that every transaction you make between now and the date you file will be examined by your bankruptcy trustee, the United States trustee, or both.

And before you take any of my advice you should interview attorneys and find one you trust and take their advice not mine.

The thing is, the potential downside of what you're talking about, is non-dischargeability of some or all your debt and jail time.

[keptdigging]

Oh and on your tax refund: Change your withholding so you won't get a refund (or your refund is very small.)

[newbie2]

My husband and I intend to file Chp 7 in Jan. 2011. Currently, we have more cash than we can exempt sitting in a money market account. Can we withdraw this cash and use it/stash it so that it will survive the bankruptcy process? Is the trustee only interested in transactions that took place 90 days preceeding the filing or do they go back farther than that? Does this same general rule apply to credit cards as well? Would I be shooting myself in the foot if I used a credit card in July and filed bk in January?

Secondly, is there a way we can protect any potential tax refund we may receive. If the tax refund can be exempted, it seems like we'd be able arrange our cash so that we leave enough room under the exemption cap to cover our tax refund. I just don't know if: 1) the income tax refund can be exempted, 2) if so, can it still be exempted if you receive the refund after you file.

Thanks for any help any of you can provide.

One thought: Even if you have excess cash that can't be exempted, is the amount that you could possibly lose to the unsecureds much less than the amount you would be discharging in bankruptcy?

Don't lose sight of the big picture while trying to protect cash.

[dmu]

Thanks for your help. My husband wants lasik so it looks like that purchase will be getting approved. Although my state has very favorable exemptions, it looks like we'll be going with the federal exemptions so that we can use the wildcard to legally protect the cash.

I really appreciate the comments. I want to clarify something. By no means am I looking to go to jail. In reading my original post, I wasn't totally clear and my use of the word stash (without any further clarification) most likely made my post sound like it wasn't on the up and up. So to clarify, I'm looking for reasonable and legal ways to utilize/stash the cash. Whether it be used on deferred maintenance or medical expenses or stashed in a retirement account where it can benefit me in the future instead of being a drop in the bucket to my creditors. If anyone as any other suggestions besides what's been mentioned, I'm all ears.

[LSUTiger32]

If you have all this cash, why are you filing BK? Try to neogiate pay-offs with your creditors. They may take a lot less than you owe and you can get out of this without 10 years of doom on your credit. While I don't regret what I did, I sure wish I had the cash to make settlements instead of going through BK.

[dmu]

If you have all this cash, why are you filing BK? Try to neogiate pay-offs with your creditors. They may take a lot less than you owe and you can get out of this without 10 years of doom on your credit. While I don't regret what I did, I sure wish I had the cash to make settlements instead of going through BK.

Even though we have a good amount of cash, we have a great amount of debt. My credit has already taken a hit since I was laid off (loss of 2/3 of family income) and did not return to work for a year. While I was laid off, I also became pregnant so now we have the added joy and expense of our little one. The way I see it, the only thing worse than having horrible credit, is having horrible credit and no cash reserves! Since the credit rating has already taken a huge hit, I prefer to take the "big bath" once and recover from it.

Additionally, I started out considering the settlement route. However, I've been told that the way the settlement is reflected on your credit report is not much better than a bankruptcy in real terms. I even pursued a settlement with one creditor. After the settlement was completed, I accidentally made a payment to the settled credit card instead of my husbands. I then received a letter stating that according to the terms of the settlement, since additional activity had posted to my credit card post-settlement, the settlement was being rescinded and the bank would now pursue full payment! Further, if the settlement results in the creditor forgiving more than $600, then the creditor must issue you a 1099 for the forgiven amount. So you seek a settlement because you don't have enough money to pay it off. For your trouble, you get to find a way to pay income taxes on the amount you couldn't afford to pay in the first place. If you can't handle the income tax liability...then heaven help you. You've effectively transferred a debt owed to an unsecured creditor to the most secured entity you'll find....the IRS.

You have a good inquiry but here's how it would have worked in my situation: 1) Credit is already greatly diminished, 2) cash would be depleted in seeking settlements, 3) In addition to bad credit and no cash, I'd owe the IRS income taxes for the amount forgiven. Doesn't seem like a good deal to me.

Lastly, I don't agree that bk results in 10 years of doom and gloom on your credit report. I've seen many people return from the perceived ashes of bankruptcy. For me, we're hitting the reset button. After many failed attempts at working with secured and unsecured lenders regarding my hardships, I'm now looking at my life the way they have......no emotion, all business. Business wise, this makes sense for us. Additionally, we have a great rental property that we can move into so trying to rent with bad credit isn't an issue for us. Given the circumstances, bk seems to be the way to go.

[BobMango]

...Lastly, I don't agree that bk results in 10 years of doom and gloom on your credit report. I've seen many people return from the perceived ashes of bankruptcy. For me, we're hitting the reset button. After many failed attempts at working with secured and unsecured lenders regarding my hardships, I'm now looking at my life the way they have......no emotion, all business. Business wise, this makes sense for us. Additionally, we have a great rental property that we can move into so trying to rent with bad credit isn't an issue for us. Given the circumstances, bk seems to be the way to go.

I think you're smart to plan your bankruptcy well before you've spent your last dime. Many folks will tell you that they wish they hadn't used all of their resources to avoid bankruptcy, but spent more time and attention to planning things better. The law allows you to protect certain assets. If you think bankruptcy is inevitable, then plan to protect as much as you can to aid your recovery on the other side of bankruptcy. I was able to exempt about $35K of assets through bankruptcy and this has helped immensely post discharge. I liquidated my herd of cattle and was able to use my exempted tax return to take care of things like dental care, moving expenses, etc.

In my own personal experience, life just six months after my bankruptcy discharge is so much better than it was for years before filing. Use the opportunity to improve your life, don't view bankruptcy as a failure or even the low point in your life. Sounds like you are viewing it for what it is, a business decision and a chance to start again, minus much of the baggage you created so far. Good luck.

[keepmine]

Thanks for your help. My husband wants lasik so it looks like that purchase will be getting approved. Although my state has very favorable exemptions, it looks like we'll be going with the federal exemptions so that we can use the wildcard to legally protect the cash.

I really appreciate the comments. I want to clarify something. By no means am I looking to go to jail. In reading my original post, I wasn't totally clear and my use of the word stash (without any further clarification) most likely made my post sound like it wasn't on the up and up. So to clarify, I'm looking for reasonable and legal ways to utilize/stash the cash. Whether it be used on deferred maintenance or medical expenses or stashed in a retirement account where it can benefit me in the future instead of being a drop in the bucket to my creditors. If anyone as any other suggestions besides what's been mentioned, I'm all ears.

That's more like it. Nothing wrong with planning a bk.
In addition to medical and dental work. Get everyone to the the eye doctor and new glasses/contacts if necessary.
DOes your home {if you're keeping it} need new gutters, siding, painting,etc. Any appliances need replacing? Car repairs, new tires,etc? You can think of a lot of ways to spend down and still be perfectly legal.
Also a good time to be sure you and your spouse have both long and shortterm disability insurance.

[dmu]

I think you're smart to plan your bankruptcy well before you've spent your last dime. Many folks will tell you that they wish they hadn't used all of their resources to avoid bankruptcy, but spent more time and attention to planning things better. The law allows you to protect certain assets. If you think bankruptcy is inevitable, then plan to protect as much as you can to aid your recovery on the other side of bankruptcy. I was able to exempt about $35K of assets through bankruptcy and this has helped immensely post discharge. I liquidated my herd of cattle and was able to use my exempted tax return to take care of things like dental care, moving expenses, etc.

In my own personal experience, life just six months after my bankruptcy discharge is so much better than it was for years before filing. Use the opportunity to improve your life, don't view bankruptcy as a failure or even the low point in your life. Sounds like you are viewing it for what it is, a business decision and a chance to start again, minus much of the baggage you created so far. Good luck.

Thanks for the encouragement BobMango. I look forward to joining you on the other side!

[lmaosm]

Why don't you have it in a retirement account?

[dmu]

Why don't you have it in a retirement account?

I don't have a problem putting it there as long as it's far enough out such that it won't jeopardize the bankruptcy filing. Does the contribution to a retirement account have to be made a certain amount of days before a bankruptcy filing to be exempt?

[keepmine]

I don't have a problem putting it there as long as it's far enough out such that it won't jeopardize the bankruptcy filing. Does the contribution to a retirement account have to be made a certain amount of days before a bankruptcy filing to be exempt?

That's gonna depend on your state exemptions. A few states do have a time period between deposit and filing.
It really is time to start speaking with some bk lawyers.

[backtoschool]

I don't have a problem putting it there as long as it's far enough out such that it won't jeopardize the bankruptcy filing. Does the contribution to a retirement account have to be made a certain amount of days before a bankruptcy filing to be exempt?

Some states will have a time limit. There is also a money limit of 5k per year per person, which is true for all states and for federal exemptions.