Receiving Unexpected Money After 341 Meeting

[Nuthouse86]

I received a check in the mail yesterday for $1100 from my home owners insurance (they refunded the premium because they cancelled the policy) I'm not keeping the property. I had no idea this money was coming in the mail and my 341 meeting was last Tuesday. Do I need to tell the court about this money I received?

[tobee43]

welcome to the forum Nuthouse86.


you are likely to get both responses, one to keep it and don't say anything and the other to tell the world.

we got ours back as well during our waiting for our 341, our atty said cash it and it's not going to be brought up at the 341. but i'm sure you'll get varied opinions about how you should handle it. we just cashed the check and stashed the cash. but we did follow our attys advice, which was also the case with our huge tax refund. we were advise spend it and it was RIGHT before our 341 close to 10k. i asked what if the trustee asks where refund money went, i was advised by my atty to simply say i spent it. again we had no problem, but again, i'm sure you may hear opposite experiences.

[LadyInTheRed]

Did they cancel the policy before or after you filed BK?

[Nuthouse86]

I have no idea, I didn't even know the policy was cancelled until I got a check in the mail.

[Pizza]

As long as the money you listed on your schedules was correct on the date of filing, and the check was unexpected as you said, you should be fine. You've already had your 341, so the opportunity for the Ch7 trustee to ask this question has passed. Post-petition income isn't theirs and $1100 is very unexciting. I wouldn't worry about it.

[LadyInTheRed]

The date of cancellation is important. If there was no indication of the cancellation date with the check, call the insurance company and ask. If it was cancelled before you filed BK, then the refund is an asset on the date of filing whether you knew about it or not and you should contact your attorney to find out if your petition should be amended to list it. If it was cancelled after you filed BK, the refund was not an asset on the date of filing.

[tobee43]

Did they cancel the policy before or after you filed BK?

i know with ours it was never actually cancelled. we just advised the insurance co. we were leaving the premises. chase who started the foreclosure became the responsible party from that point on according to our ins co. i had even called the insurance company about this asking them why they just wouldn't keep the money for the existing policy. this is what the insurance company said:

once they were informed about the pending foreclosure their position was, during your foreclosure process,the costs of maintaining the insurance will be added into the fees of the entire process, if we do not reimburse you, it's like the bank will get paid twice, as they must maintain the insurance after beginning the foreclosure process. we are paying you your out of pocket costs since you vacated the house and the refund is based on that date. now, this may vary state to state on how exactly it works.

[Pizza]

The way I read OP's post ("I'm not keeping the property") sounds like it was surrendered in the BK, so the check would be issued after the insurance co. got wind of it, or after the BK was filed. If not, it is still likely that exemptions would cover such a small check (though amendments would be appropriate).

[LadyInTheRed]

Let's not make any assumptions. We don't have enough facts to tell the OP not to worry about it. We don't know when the OP defaulted on the mortgage or when or if he moved out. The insurance very well could have been cancelled before the BK was filed. We don't know. The OP doesn't even know! What we do know is that the OP received a check after the 341 that was a refund on a policy that was cancelled.

The date the check was issued is irrelevant. The OP became entitled to a refund on the day the policy was cancelled. If that was before the BK filing, then on the date of filing, OP had a right to a refund which is an asset that must be reported.

Yes, if the petition has to be amended to list the refund as an asset, the OP can use an available exemption, if there is one. I wound't say it is "likely" that there is an exemption without checking Colorado's exemptions and knowing what exemptions the OP has already used. After a very quick check of Colorado exemptions, I don't see any exemption that will cover an $1,100 insurance premium refund, or even a $500 refund.

Nuthouse86, don't spend that money until you investigate further or your attorney says it's okay.

[Pizza]

The date the check was issued is irrelevant. The OP became entitled to a refund on the day the policy was cancelled. If that was before the BK filing, then on the date of filing, OP had a right to a refund which is an asset that must be reported.

Alrighty then, I guess I hadn't considered that aspect. I knew they would take tax refunds, but general refunds too? Is it not converting one asset (prepaid insurance) into another (cash)?

[tobee43]

since lady's point made such good sense i had to really think back about exactly when we did receive our check. in the case of our insurance check i realize it had to have been approx. 2 years before we actually filed, but had hired our atty. not the tax refund, which we rec'd maybe 3 weeks before our 341, but the insurance check was not an issue since it was rec'd way before not while we were awaiting our 341.

and, of course we didn't consider listing the ins check because it was not within the scope or range of what we needed to list at the time we did the petition. i believe lady's point is very valid and really would check with your atty about it.

[Pizza]

My attorney advised me not to worry about small work-travel reimbursements, so I thought the same rule would apply to insurance (and other) refunds as well. I must have been incorrect

[tobee43]

we'll see what OPs atty says, i still would not be surprised if the atty said just keep it and keep it to yourself. but we will see, again as lady points out for some it could be a real issue. i would do whatever my attys advises me to do (in most situations).