Tax return question

[waldo05]

Hello,

We are expecting a sizable tax return this year, and plan to file in the next couple of months. Are we allowed to paydown student loans and our car loans up to our exemption (5000.00 per vehicle in AZ) before we file without causing any issues with the trustee? We are also looking into other extemptions we can spend the money on as well. Thanks in advance....

[tcreegan]

Hi waldo,

The trick is spending the $$ on life's necessities and not favoring one creditor over another. And nothing going to family or friends (insiders)

I remember a post or case where the trustee frowned on paying down student loans, didn't think student loans were necessities and debtors were just trying to keep $$ out of the BK

Seen lots of posts about car spending pre-BK, pay-off, trade-in, refinance, buy new; never heard of a problem except someone buying a luxury class BMW

Seen posts on putting the cash into IRAs or other exempt retirement funds. These seemed to depend on the history of contributions, a contribution somewhere close to what you usually put in seems to fly.

Paying ahead on medical/vision/dental not covered by insurance seems to be OK

Taking care of maintaince on car and house seems to fly (just don't go over "reasonably necessary")

Pay ahead on taxes, pay traffic tickets, get caught up in back child support, alimony, restitution; these seem to be OK


BUT....it really is going to come down to what your trustee thinks about it. In general, closer to filing date looks more suspicious; size of $$$, higher raises suspicions. It ends up being "what the trustee will allow" and "What will make the trustee put you under the microscope"

The best place to spend your $$ is on a BK attorney so they can tell you what is going to fly w/ your trustee and what is in for a crash landing.

Good luck w/ your filing!

Tom in Colo