Is this a wise move?

[vicmost]

I live in California and plan on filing a chapter 13 as an individual (I'm married).
I am a mechanic by trade and I own about 8k in tools. I am in a position to upgrade my equipment by trading up for some newer tools / tool box. If I do this I will lose about 1/2 my equity and will go in debt about 8k.
I know people do this by purchasing a new vehicle before filing but I want to make sure this is a simular situation...I have a simular issue with my vehicles (they're both paid for) but I don't really forsee the need for a new vehicle in the next 3 -5 years. I will need the tools as they will help me increase my income and help keep it stable..

Anybody do anything simular before filing? I don't want my case thrown out because of this...

Thanks!

[Trixie007]

I'm not unsympathetic to your situation, but I've been browsing the forums a lot more than usual lately, and I am struck by how many people are contemplating new debt on the eve of bankruptcy. I know there are all kinds of reasons, wants, whatever - but what does this really say about what we've learned from all of this? One person who's posted recently is talking about how tough things still are, and he was discharged early last year! It's very sad.

[StartingOver08]

I don't know the answer, but I see that there is an exemption for Tools of Trade in California. See this link:

http://www.bankruptcyinformation.com/CA_exemp.htm

I can see where it is important to have your tools up to date. I don't know if that would be a red flag to your Trustee or not. I do know that the Trustee will require you to not take on additional debt during your 13 without permission. So you may want to upgrade prior to your filing. This is where your attorney is invaluable...what triggers special examination by your specific Trustee? Your attorney should know.

I am trying to do additional research as it appears that your tools might have a lien on them if you owe the vendor at the time of BK.

Ok. Take a look at this link:

http://www.moranlaw.net/planning7.htm#Maximizing%20exemptions

[B]If you have significant non exempt assets, get good bankruptcy counsel about converting non exempt value into exempt value.

Courts are variable about what constitutes good bankruptcy planning versus what is a scheme to "hinder, delay or defraud creditors". Maximizing exemptions is traditionally permissible; hindering your creditors is grounds for denial of discharge.

I submit that these are but two ends of a continuum and drawing any lines along that continuum is art, not science.

If your assets exceed the exemptions available in your state, bankruptcy counsel can evaluate the extent to which those assets can be consumed or converted to exempt assets within the tolerances of the local judges. [/B]

You don't want to find yourself with grounds for a discharge. So it depends upon when you purchase and when you file. If there is enough time between the two events it might be possible. Read the link for more detailed information.

[vicmost]

I'm not unsympathetic to your situation, but I've been browsing the forums a lot more than usual lately, and I am struck by how many people are contemplating new debt on the eve of bankruptcy. I know there are all kinds of reasons, wants, whatever - but what does this really say about what we've learned from all of this? One person who's posted recently is talking about how tough things still are, and he was discharged early last year! It's very sad.

Trixxie007
I understand your point. To me it seams that the system penalizes you if you have your cars or tools paid for. It encourages people to get new debt in order to take advantaage of the exemptions allowed. Everybody's situation is different...Do to a job loss I am returning to this trade...I haven't worked on cars for 6 years so I really need to get some new tools..On the plus side I can keep my old cars running for quite some time!....

[vicmost]

Trixxie007,
On a side note..I 'm current on all my Bills but will start going into default next month..My credit cars are all maxed out, etc...etc..
I applied for two tool acounts (Snap-on and Matco tools). One gave me 12k in credit and the other gave me 18k!!!
Did I say I was maxed out?.....If I was a loan officer I wouldn't have given me any credit!!

[Trixie007]

Too bad I moved away from California, you could've "practiced" your skills on our cars! Best of luck to you.

[vicmost]

Startingover08

I don't know the answer, but I see that there is an exemption for Tools of Trade in California. See this link:

http://www.bankruptcyinformation.com/CA_exemp.htm

I can see where it is important to have your tools up to date. I don't know if that would be a red flag to your Trustee or not. I do know that the Trustee will require you to not take on additional debt during your 13 without permission. So you may want to upgrade prior to your filing. This is where your attorney is invaluable...what triggers special examination by your specific Trustee? Your attorney should know.

I am trying to do additional research as it appears that your tools might have a lien on them if you owe the vendor at the time of BK.

Ok. Take a look at this link:

http://www.moranlaw.net/planning7.htm#Maximizing%20exemptions

[B]If you have significant non exempt assets, get good bankruptcy counsel about converting non exempt value into exempt value.

Courts are variable about what constitutes good bankruptcy planning versus what is a scheme to "hinder, delay or defraud creditors". Maximizing exemptions is traditionally permissible; hindering your creditors is grounds for denial of discharge.

I submit that these are but two ends of a continuum and drawing any lines along that continuum is art, not science.

If your assets exceed the exemptions available in your state, bankruptcy counsel can evaluate the extent to which those assets can be consumed or converted to exempt assets within the tolerances of the local judges. [/B]

You don't want to find yourself with grounds for a discharge. So it depends upon when you purchase and when you file. If there is enough time between the two events it might be possible. Read the link for more detailed information.

Thanks for the informative response! The websites are very good. It seams that I should probably seek legal advice as this is case specific.
I'm planning on filing in about 6 months from now..I'm just starting to fall behind on my bills this month...I also need that time for my home value to drop a bit more so I can lien strip my second...
? If I do seek legal counsel isn't that like a catch 22? I read on that site that once you consult with an attorney and then use credit shortly thereafter it raises a red flag....
I'm probably over reacting...BK has so many variables and I want to make sure I do the best I can..I read somewhere on this site that 40% of Chapter 13's fail!!!

Thanks!