Spending down cash prior to Ch7 filing-IRA?

[Cavedog]

I am sitting here on a beautiful Sunday afternoon pondering how to spend down this money is my savings account legally and without causing problems with a trustee. Middle district Florida here. I read pretty much most of the posts and came up with the normal:

Stock the pantries
Dental work
Car repairs
clothes for the kids
AAA membership for my 5 year old car.
Attorney fee/filing fee.



Even with those, I am estimating that I will have about $3500 of non-exempt cash left over.

Anyone have any recent experience with deposting money in my IRA just prior to filing? Maybe open a new one IRA instead of putting it in my existing one just in case it gets reversed I would know the exact amount and wont have to worry about the co-mingling of account funds? I know some states do not permit this within so many days of filing, but I dont see that for Florida.

I know this might be a silly idea, but if I cannot exempt or spend the money, I would rather pay my $1600 a month payments to my 6 creditors over the next two months just so my credit score won't get dinged any worse than it already is. I am current with them all, but about to start the default process next week with them. I know I would have to disclose this, and the trustee will take it back from the creditors, but that would be better than having 6 credit card ding me for the next 2 months.

[btbeme]

Don't pay the creditors. Don't. It will make zero difference on your "credit" score (actually a debt score) and will only serve to prolong and/or complicate your process.

As to the extra cash, an IRA deposit isn't a bad idea SO LONG AS you generally make a deposit like that on a fairly regular basis. Make a more limited deposit of a few hundred dollars.

There are a lot of other expenses that you can spend the cash on. Pay ahead a month on your utilities. Pay for the kids' school lunches for the next several months. Take a short, inexpensive vacation with your family, but don't stay in five-star hotels. Purchase the next set of tires you car will need and put them in the garage. If you have property taxes, make an early payment. Buy school supplies, ink for your printer, and get your carpets cleaned. Donate a couple hundred dollars of food to a local food bank (call them first and ask what they need the most).

In short, spending the money is a much better, safer alternative than stashing it (unless you regularly stash it in your IRA and can show a track record of doing so), and certainly a better idea than paying creditors. Just spend it on things a reasonable person would think is OK to do, and something that you might normally do anyway. Each Trustee and district are different, but they all generally adhere to a "reasonable and prudent" philosophy.

As for the creditors...why, oh why, are you still paying them anyway? My friend, I believe that you may have fallen for the mistaken belief that a "credit" score is the most important thing in your financial well-being. It is not. Being liquid - having the cash to make purchases and having no debts - is a much more nobel goal.

[dman]

Stop paying the credit cards. I understand your thinking...if you're going to lose the money anyways, might as well help preserve your credit score. But, you can find a way to spend that money, trust me.

We're talking about $3,500 here, that's not going to be that hard to spend.

Do you own your house (and plan to keep it)? I bet there's some improvements that could be done...possibly some that will have a nice tax break? New heat pump? Energy efficient windows? New water heater?

Getting new tires for your car is a good idea, especially if you plan to keep that car for a while. Get some expensive Michelins...they have some nice rain-tires that cost about $100 each, or more...easily justified if you're in FL. I know you listed car repairs...but are they just repairs? How about maintenance? Spark plugs/wires, oil change, transmission fluid/filter change, etc. Maybe it's time for a new timing belt...that can cost a pretty penny right there.

Do you have room for a deep freezer? Buy one, and stock it up too.

Plan on downgrading your cellphones to prepaid? Each one could use a $100 prepaid card, right? Maybe two?

Still have money leftover? Want to push it a bit? Sure thing...

Plan on dropping dish/cable? You may want some new equipment...set-top boxes like a roku (for internet streaming) or a wdtv live hub (for local media viewing...don't worry it still does netflix).

How much do you spend on going out to the movies? If it's a lot...see how much it'd cost to have a "good enough" setup at home. 50" plasma, blu-ray player, surround sound...don't go over the top...but if you can show you'd save money within a year, it could be a "reasonable expense." I.e. if you're paying $200/mo on going out to the movies now...but can spend $1,500 now and cut out most of your movie expenses...that's showing you're looking at cutting costs long-term. Just don't go overboard, make it reasonable.

Point is...$3,500 really isn't that much, and can easily be spent over the next two months on reasonable expenses. I wouldn't recommend going out and buying that new plasma tv right away...rather if you've done EVERYTHING else possible, and you've sat down and figured that this tv would SAVE money within the next year, then I'd probably go for it. Yeah, it'll have to be included with your household items...but it's value drops a good bit the second you buy it (unless you bought used). The trustee is less likely to bother with it, and IF he/she does...it's no worse than just handing the money over.

On the IRA...ask your lawyer. That said, I would probably recommend against opening a brand new one this close to filing. If you already have one open, just make some regular contributions to it (i.e. if you generally contribute a few hundred every few months...continue doing so; a small increase in your contribution shouldn't be a big deal).

[Cavedog]

Thanks for the tips there. I have added them to my list! Might need to pass on the Plasma TV idea though. Now a nice 110 inch projection with a Bose set up sounds tempting.. :-)

Just hard to not pay a bill that says due. The mortgage was hard not to pay. The couple medical bills were tough to ignore. Now its the credit cards turn... Wish I could fast forward about 5 months!!

[AngelinaCatHub]

My goodness, this forum works!! Both the poster is honestly thinking wisely and honestly , and the responders are both VERY accurate. Puts us "old members" to shame at times. I guess we did good in training our eventual replacements.

Very good advice. Stay on a roll folks. Honesty is best policy, and nothing wrong with planning within legal limits. Great job. 'Hub

[frogger]

Toilet paper, paper towels, rice, dry beans, canned goods, bullets, whiskey, etc. Anything that won't spoil.

[tobee43]

Toilet paper, paper towels, rice, dry beans, canned goods, bullets, whiskey, etc. Anything that won't spoil.

LOL!!! you're to funny frogger.

Cavedog, we did the same, and we also filed in the same district, we spent it on household items, NOT enough on the car..(darn) canned goods and some things for our home.

[StrawberrySu]

This is not really a suggestion but more of a question .... I know it may be gruesome to some, especially if you are young, but what about prepaying for your funeral? Either as a way to spend down cash prior, or setting up a payment plan for boosting expenses on your schedule J? No way can the trustee deny you won't need it....eventually. Never having done it, I don't know anything about how it works, but just wondered about it. I suppose you really wouldn't want to do it unless you were sure you were going to stay where you were. As far as I know, there aren't any franchises, lol

[tobee43]

wow...yes, actually there are franchises!!!

while my son in law is NOT teaching little ones he worked his way through under grad and grad school working at funeral homes....and many are connected nationally!!!!

he wipes little noses during the day hours and by night picks up dead bodies...YUCK. and, now he's decided to go back for his masters in this dead stuff, since he says teaching now stinks. (not worse than a dead body one would think?).

[StrawberrySu]

wow...yes, actually there are franchises!!!

while my son in law is NOT teaching little ones he worked his way through under grad and grad school working at funeral homes....and many are connected nationally!!!!

he wipes little noses during the day hours and by night picks up dead bodies...YUCK. and, now he's decided to go back for his masters in this dead stuff, since he says teaching now stinks. (not worse than a dead body one would think?).

Tobee I did not know that! I seem to remember when arranging my mom's funeral that one of the homes would basically transfer the service you had paid for in one state to a different one if needed (for a fee of course). She lived with us in North Carolina (our last duty station in the Navy) but wanted to be buried in OH. Both my hub and I are down for cremation and urn, so we don't need to be anywhere specific. Wish my mom had done that, I could take her with me where ever I go. Now she is buried in the town she grew up in, but all her kids and most of her extended family no longer live there.

[tobee43]

it can be a difficult situation. i really understand. my aunt LIVED for opera...so we had to take her ashes unbeknownist to everyone ( a made up word of sorts) to the opera house, (this was in a major city) and spread them around...OMG...it was in her will, what could be do...my poor sister and myself and go sneak in this gorgeous exquisite place and spread ashes. i know my aunt is where she wants to be. so that made us ultimately happy.

i just want to go to sea, plain, simple, just a zip lock bag will do, then out to sea is where i'd like to be.. actually we BOTH feel the same, so it should be easy for our kids.

[sunshinepa]

This is not really a suggestion but more of a question .... I know it may be gruesome to some, especially if you are young, but what about prepaying for your funeral? Either as a way to spend down cash prior, or setting up a payment plan for boosting expenses on your schedule J? No way can the trustee deny you won't need it....eventually. Never having done it, I don't know anything about how it works, but just wondered about it. I suppose you really wouldn't want to do it unless you were sure you were going to stay where you were. As far as I know, there aren't any franchises, lol

Actually, that is an excellant suggestion. I did it when I retired and it was such a relieft to both my only son and myself. Now he doesn't have to deal with all the arrangments and his grief at the same time. I know it made it easier for me as executor of my fathers estate to not have to deal with it. If I had to spend down money, it would be one of the first things I would consider.

Good luck whatever you decide!

[Cavedog]

Hey Tobee,

How much did you spend on household items? Just curious, because I can drink a lot of rum!

[LadyInTheRed]

I'd be careful about buying "things." They become assets and you don't have a very large personal property exemption in Florida. Prepaid cell phone cards are also an asset that you would have to report. I believe you are in the one district where the trustee actually might send somebody to inventory the contents of your home.

I think you should explore the IRA idea. Ask a local attorney if that will work in your district.

[Cavedog]

Florida exemptions improved quite a bit when you go from only 2k to 10k(non-homestead) in personal property exemptions allowed, plus 1K in each of our two vehicles. I have asked our paralegal to get the deal on Orlando's trustee's regarding IRA's.