common red flags on required documents?

[JV09]

Hi, I'm new on this forum, a friend of mine told me about it. I am looking to file in the next month or so. But this weekend, I want to make sure I have everything in order such as pay stubs, bank statements, and tax returns. I wanted to ask what are red flags that I should look for when going through these documents? I like to know so I can get a better time frame as to when I should file. For example, I know I should not use my cc for luxury items or any cash advances a few months prior to filling and they would be able verify that on bank statements. Any red flags on tax returns or pay stubs? I am guessing that pay stubs are used to verify means test but not sure about tax returns.

[scorpion35]

Hi, I'm new on this forum, a friend of mine told me about it. I am looking to file in the next month or so. But this weekend, I want to make sure I have everything in order such as pay stubs, bank statements, and tax returns. I wanted to ask what are red flags that I should look for when going through these documents? I like to know so I can get a better time frame as to when I should file. For example, I know I should not use my cc for luxury items or any cash advances a few months prior to filling and they would be able verify that on bank statements. Any red flags on tax returns or pay stubs? I am guessing that pay stubs are used to verify means test but not sure about tax returns.

1 red flag on tax returns is BIG REFUNDS.trustee will want to know how u spent it,and will probably want a cut of it.
PAYSTUBS are used to verify your income
BANK statements are used to check for big withdraws and deposits ,if he sees any big withdraws he probably will want to know where did the money go(be ready to provide paper trail)
CREDIT CARD statements are used to check for luxury purchases ,cash advances ,etc etc.

[SMinGA]

Really, in my opinion, if you are certain you're going to file: you should not be using the cards any longer at all. Look at it this way: you need to learn how to live without credit, why put it off? If you can make that adjustment now you'll be better off in the long run.

[JV09]

1 red flag on tax returns is BIG REFUNDS.trustee will want to know how u spent it,and will probably want a cut of it.
PAYSTUBS are used to verify your income
BANK statements are used to check for big withdraws and deposits ,if he sees any big withdraws he probably will want to know where did the money go(be ready to provide paper trail)
CREDIT CARD statements are used to check for luxury purchases ,cash advances ,etc etc.

How big is a big refund? Also do I need to list a 401k loan that I took out 3 years ago? I paid it off 3-4 months ago.

[tcreegan]

Hello and welcome JV09,

There are two phases to red flags. First is the filing with the BK court.

Common errors:
Within 180 days of filing, did you complete and have a certificate from the required pre-BK class?

Did you go to your courts website and get a list and order of documents needed in the petition? (don't staple anything)

Do you have the correct format for the creditors matrix?

Do you pass the means test?

Second phase is the BK trustee looking over your case. This is the person who will want 2 yrs tax returns, bank statements, cc statements, etc.
This is highly variable by district and even by trustee w/in a district. As soon as you get a trustee assigned to your case, contact their office and ask what documents they will want.

Red flags:

over median income, positive DMI on means test, positive DMI on Sched. I & J
large cc purchases w/in last 90 days (multiple hundreds, ordinary living expenses OK)
Big chunks of money moving in/out of bank accounts.
Any transfers of property within the last year, especially to family members
As mentioned before, large tax refunds (large depends on trustee, usually 1K or over)
Be ready to explain large changes in income

But....this is all highly variable by district and trustee.

The 401 loan is probably OK. Don't need to list it as it was paid off b4 your filing. The red flag would be if you made some large payments at the end.....could be called a preferential payment.

Good luck with your filing!

Tom in Colo

[hankhill]

What is considered a large tax refund? We got about $1,200 last March, but we spent it all on paying our credit cards, plus we got tires for our truck that we really needed. Will they question that?

[ssmdem]

What is considered a large tax refund? We got about $1,200 last March, but we spent it all on paying our credit cards, plus we got tires for our truck that we really needed. Will they question that?

I think that would be easy to document. You can easily prove the credit card payment. Get the receipt for the tires, and you're good to go. They just want to see that it wasn't spent frivously.

[backtoschool]

Here are some red flags:

Large deposits to your bank accounts. (The trustee will ask about these at the 341)

Any charges on your credit cards in the last 90 days. (90 days is the legal definition of insolvency. As far as the bankruptcy court goes, you know you are insolvent 90 days before filing, and therefore should not be using credit cards)

Vacations or charges for any luxury items on your cards going back six months or so.

Large car payments that are over the irs standards. Food and entertainment bills that are over the irs standards.

Anyway that should give you a start.