Attorney telling me that braces for my son may be "preferential"??

[NewPage]

Our 15 yr old needs braces - not just cosmetic, there is a stuck tooth that requires oral surgery to bring into place, and braces are part of the procedure. The total, with paid in full cash discount, is $5k.

We have arrangements to get the braces put on tomorrow, and plan to pay from the tax refund the full amount. I haven't signed a contract yet, so I wouldn't think this is considered existing debt. All we have done up to now is have the free consultation where we were presented with the treatment plan. Tomorrow is the contract signing and beginning of treatment.

My attorney emailed this response today:

I can’t tell you that the payments you propose will be accepted by the trustee. That is only a decision he can make. If he wants to pursue them that is within his authority. The payment for braces in particular would seem to me to be a preferential transfer that he could pursue. Can you wait a few months to file your case so that the dust settles after you use your tax return?

Sigh. I/we just want this to be over with. I wish he had responded sooner (I emailed 5 days ago)

This is what I am writing in response; thoughts on my questions to him?

I was wondering about that preferential payment situation, but I thought that medical and dental would be okay to go ahead with. The braces aren't simply cosmetic; he has a tooth on one side that is positioned sideways in the gum, above his other permanent teeth. It will require surgery to get that into place, and the braces are part of the treatment to get that tooth down into place so that he's not left with a big gap his whole life. This isn't an existing bill; it is a "new purchase" so to speak, as we would be paying at time of service. (Just reiterating facts, not arguing!)

From my reading, I understand that the federal Earned Income Credit is exempt in Oregon. $2,051 of the refund amount is EIC. Am I allowed to exempt any or all of that $2,051? Would any/all of the remainder of the refund ($5,886) then fall under the $7,500 bank deposits exemption? Is the refund considered "mine" entirely, or is it split between my husband and myself?

If you think it best to wait, then that is what I will do. My only concerns are the lawsuits from Discover and Amex, and those resulting in a default judgment. Again, my reading indicates that a lien cannot attach to exempt equity in Oregon; is that the case?

Would you still advise then not signing a quit claim so that my husband can re-fi, if we wait 91 days to file? (I am asking at his insistence, I think I already know the answer).

[screentest]

NewPage,
I am on California, not in Oregon; however I indeed used a portion of my tax return and a monthly deduction in my section 125 employer account to cover braces for my two daughters. I accounted for every dollar of my tax return to include the dental receipts and the trustee and the OUST never batted an eye over it.

No preferential payment as they were not a creditor and dental work was an absolute necessity in my case.

ST

[ssmdem]

We had no issue with orthodontic payments either. Spend over $500 a month on orthodontic payments, and it wasn't questioned at all.

[NewPage]

I think he thinks that the amount of 5016 at once is the potential problem.

??

[HHM]

It's not a preferential issue per se, that is not the right technical term.

Your attorney is giving you very conservative advice and that is good. Basically, what your attorney is saying is that your proposed transaction carries SOME risk (in other words, on a scale of 1-10, the risk is NOT zero).

However, the issue is dissipation of assets and/or fraudulent transfer. I think the trustee would have a hard time proving it.

BUT, on the flip side, many orthodontists accept payment plans. So, if you got the braces, paid $500 down and agreed to $500 per month, and then used the tax refund to pay off the balance, that WOULD be a preferential payment.

[NewPage]

The ortho wants a minimum of $1320 to start treatment, and payments thereafter $165/month, which is not in our budget at this time.

[AngelinaCatHub]

It's not a preferential issue per se, that is not the right technical term.

Your attorney is giving you very conservative advice and that is good. Basically, what your attorney is saying is that your proposed transactions carries SOME risk (in other words, on a scale of 1-10, the risk is NOT zero).

However, the issue is dissipation of assets and/or fraudulent transfer. I think the trustee would have a hard time proving it.

BUT, on the flip side, many orthodontists accept payment plans. So, if you got the braces, paid $500 down and agreed to $500 per month, and then used the tax refund to pay off the balance, that WOULD be a preferential payment.

HHM has given a very wise observation. I can see both sides.

The ortho wants a minimum of $1320 to start treatment, and payments thereafter $165/month, which is not in our budget at this time.

OK, my turn: First, ask your lawyer to get permission or to state that this is a medical procedure not just a simple tooth adjustment. Time is of the essence as he is in his fast growing years.

Next, work with the Doc and ask if he would take $500 down, and $500 a month instead of a large (viewable) down payment. The procedure takes time so the Doc would not be out as if you stopped paying, he stops working. Not a bad risk for him.

Your bk is 7? it won't take too long if this can be waited upon. I know nothing about the tax aspect of your tax return. HHM may. As HHM said, your lawyer is on your side and better to be right than gamble at your expense. 'Hub

[NewPage]

Sorry if I'm being dense here....obviously the hypothetical $500 down would be from the tax refund -- but where is the $500/month payment coming from? Not our budget, I'll tell you that!

Yes, Chapter 7.

The $5,016 is for 24-30 months of treatment, the entirety of it. In full. Nothing more to be paid (unless there is excessive breakage or loss of retainers, etc)

We are set to go on his braces tomorrow and probably will just end up waiting 91 days. Bleah....

[HHM]

Sorry if I'm being dense here....obviously the hypothetical $500 down would be from the tax refund -- but where is the $500/month payment coming from? Not our budget, I'll tell you that!

Yes, Chapter 7.

The $5,016 is for 24-30 months of treatment, the entirety of it. In full. Nothing more to be paid (unless there is excessive breakage or loss of retainers, etc)

We are set to go on his braces tomorrow and probably will just end up waiting 91 days. Bleah....

Okay, I see what the problem is...you are pre paying an expense and your lawyer is right, that is a potential problem. The issue of the tax refund is irrelevant. From the trustee's perspective, you are borrowing from assets of the BK estate to pay post filing expenses. No easy answer here. If the $5k is needed to pre pay 2-3 years of service, you are actually better off working out a payment arrangement.

[NewPage]

[tcreegan]

Hi all, Hi NewPage,

...why can't you exempt it under the O.R.S. 18.348 (the bank deposits 7K exemption) ? If it is exempt, it is not an asset of the BK estate, should be OK to pay the dentist.

Am I missing something here...?

Tom in Colo

[NewPage]

That is exactly my question into the attorney. I just wrote in another thread that I think he sometimes forgets I am in Oregon -- he is Washington-based and I think forgets there are differences sometimes.

I asked him this today; no response yet as it was later in the afternoon when I emailed him:

From my reading, I understand that the federal Earned Income Credit is exempt in Oregon. $2,051 of the refund amount is EIC. Am I allowed to exempt any or all of that $2,051? Would any/all of the remainder of the refund ($5,886) then fall under the $7,500 bank deposits exemption? Is the refund considered "mine" entirely, or is it split between my husband and myself?

Does anyone know how a refund situation is approached when one spouse is filing and the other is not? If it's split down the middle, my "half" is $3968.50.

[oregonpilot]

Hi all, Hi NewPage,

...why can't you exempt it under the O.R.S. 18.348 (the bank deposits 7K exemption) ? If it is exempt, it is not an asset of the BK estate, should be OK to pay the dentist.

Am I missing something here...?

Tom in Colo

Here's what my attorney told me about the 7k bank deposits. I could exempt an amt up to that 7k if it was deposits from the sale of exempt stuff (proof)..like my van, my bed , or my 1st born. (and she's 37) LOL
Not sure what category selling my sole was going to fall into!
I was hoping to be able to have money to get me thru the winter...most of my income comes in the summer and usually Nov - march is pretty thin. I can usually put money aside from summer jobs to get me thru the winter.
So i couldn't have more than 700. at filing. Making this winter really tough.

[HHM]

I will defer on the nature of OR exemptions, but let's assume the cash is exempt.

You still have a problem if you pre pay the expense. The way around this is what your attorney suggested, hold the tax refund, exempt it, then pay for the braces after the trustee files his final report of no distribution.

[NewPage]

Can you wait a few months to file your case so that the dust settles after you use your tax return?

Is what my attorney wrote yesterday. I'm assuming he means to wait until 90 days have passed, then file? I hope I understood that right, because braces on and paid for today. I guess this means I will be waiting until....May 25 or so to file. Oh boy! LOL