[Single Filers] How is it that you can exempt ~$12k cash in the bank but still declare bankruptcy?

[Fminus]

Hey BK Forum,

I've been reading up on the federal wildcard exemption that is available in my state. It seems, based from what I've read, a single filer can exempt up to ~$12k in cash. How is it allowed for people to save up $12k cash, exempt all of it using the wildcard, and then declare bankruptcy? Wouldn't your creditors want a piece of that pie instead of a person saving it all up?

Thank you.

[LadyInTheRed]

Sure, the creditor's would like that money. But, the law states that every debtor has a right to exempt certain assets from collection by creditors. In BK, the creditors are no longer the ones in control and don't get everything they want. You aren't expected to become destitute to file BK.

[Chrysalis]

In the state of Indiana, for the two of us filing jointly, we are allowed a total of $800 in all accounts, anywhere. That feels pretty darn destitute for a family of five.

[leonel9]

Keep in mind this is the unused portion of the homestead exemption. I guess it's possible someone would have $12k in cash laying around, and able to exempt it. It's also possible that someone with $12k in the bank is also a homeowner, and as such may be concerned about their homestead exemption. If they have enough equity, there may not be any unused exemption available.

[bcohen]

When I filed in Arizona, the exemptions at the time allowed only a paltry $300 in cash or cash equivalent for a single person, or $600 for a married couple. This was in 2013, although the exemptions have now increased somewhat. I believe I had about $800 to $1000, but fortunately, the trustee did not bother going after the additional money.

[rjmwx81]

I don't think many states have an exemption for that much cash. People protecting that much cash are likely renters who don't own a home, and can thus use their homestead exemption (up to a certain amount) to protect other assets.

[Vball]

You aren't expected to become destitute to file BK.

It sure feels like it! I'm in a chapter 13 with no savings, and we pay out ALL our disposable income. I have no idea how we will pay for our car tags next month. And it's not like over the next 5 years that we won't have extra expenses, at my last oil change I was told I need two more tires - well, I can't! We are a month behind on electric and internet (needed for my job).

I feel like C13 was designed for people to fail, I just don't see how we will be able to do it when we have no room for emergencies. And I just love (sarcasm) how the plan doesn't allow us to help with college expenses for our 17 year old daughter, yet the FAFSA figures that we can pay a ton of money.

Sorry to vent, but we are only a couple months in and feeling like we'll never make it

[sarra1833]

Vball sounds like you need to convert to ch7 asap. Ch 13 is for people with good jobs apparently. Ch 7 will save your butts. Id change to ch 7 asap.

[bbeagle]

It sure feels like it! I'm in a chapter 13 with no savings, and we pay out ALL our disposable income. I have no idea how we will pay for our car tags next month. And it's not like over the next 5 years that we won't have extra expenses, at my last oil change I was told I need two more tires - well, I can't! We are a month behind on electric and internet (needed for my job).

I feel like C13 was designed for people to fail, I just don't see how we will be able to do it when we have no room for emergencies. And I just love (sarcasm) how the plan doesn't allow us to help with college expenses for our 17 year old daughter, yet the FAFSA figures that we can pay a ton of money.

Sorry to vent, but we are only a couple months in and feeling like we'll never make it

Chapter 13 was a godsend for us. We couldn't afford anything before we filed. Inspections, tires, clothing. Lived without TV, cuddled up in the cold as we couldn't afford heating our house above 60. Could only afford like $100 for groceries a week for a family of 4. Our credit card bills were $2000 a month on a $4000 a month income.

Once we filed, all our credit card bills were gone, and we paid less than $300 a month for the chapter 13 bankruptcy. We had an extra $1700 to buy stuff we needed. It was like winning the lottery in the sense that we became normal people. We could buy new underwear, have internet, have TV, go to a theme park in the summer once in a while. We could go out to movies occasionally. We could heat our house and buy A/Cs in the summer.

Given my situation, I don't get how some people are suffering barely able to get by. Our lawyers took into account how much it cost to pay for our housing, taxes and cars (which we paid outside of the bankruptcy payment), clothing, gas, baby diapers, groceries, sanitary, internet, tv, electricity, heating, cooling, maintenance, etc. We were living on way below what the minimum standard of living was for a family of 4 in our state, and that was all taken into account.

[sophieanne]

bbeagle - I'm happy to read that your plan has worked out well for you. I think, as with everything, everyone's situation is different - how much they pay into the plan, exmptions, expenses, etc. A lot of people pay a lot more than $300/month. Budgeting is the key to success but some people's budgets are a lot tighter than others.

[bbeagle]

bbeagle - I'm happy to read that your plan has worked out well for you. I think, as with everything, everyone's situation is different - how much they pay into the plan, exmptions, expenses, etc. A lot of people pay a lot more than $300/month. Budgeting is the key to success but some people's budgets are a lot tighter than others.

I think there might be a lot of bad lawyers. Because I looked into it all before I filed, and found that there are IRS tables for all expenditures. Maybe some lawyers aren't using those? It makes no sense that some people don't have enough money for basic expenditures and others do.

(My plan would have been around $1800 a month if my house and taxes were paid by the lawyer - but they let me pay for those myself).

[justbroke]

I think there might be a lot of bad lawyers. Because I looked into it all before I filed, and found that there are IRS tables for all expenditures. Maybe some lawyers aren't using those? It makes no sense that some people don't have enough money for basic expenditures and others do.

The bankruptcy attorneys 100% use these. In fact, nearly every single bankruptcy attorney and the Trustees use either a program called Best Case Bankruptcy or Bankrupter. Those programs import the latest "United States Trustee Program" (USTP) allowances. The allowances are based on the IRS Financial Collection Standards (FCS). In general they are the same, but the USTP breaks out the mortgage/rent from the "non-mortgage"/"non-rent" expenditures. Otherwise they're the same.

Now, where some bankruptcy attorneys may not be as "seasoned" or as creative is in cases where there is little to no disposable monthly income (DMI). In those cases, where the secured debt has no missed payments and has no arrears, the attorney should motion to pay them outside the plan. That will save the 10% premium that it costs to have the Trustee pay this. Over the course of a 60-month plan (or even a 36-month plan), that can add up when you otherwise don't have any DMI. Having no DMI means that this comes out of the debtor(s) pocket and not from any surplus.

The other problem is that people, even in a Chapter 13, are trying to keep things that they really can't afford. While Chapter 13 can be a blessing, having outrageous costs and little to no DMI means that the debtor is already on the verge of having just one major expense topple the entire Chapter 13.

Additionally, there are some things that are pure strategy and only a very seasoned attorney will know this. For example, I kept 2 cars (one for the family) because I got to claim the operating allowance and the ownership allowance. This created room in the budget for any vehicle event, and also helped with other major events (e.g. my sewer line needing to be dug up -- it was under concrete -- and replaced).

Each Chapter 13 case and plan is unique. That's why there are differences. A Chapter 13 plan is part experience and part black magic. It's also convincing the Trustee that the expenses are in line with your income, area you live, commuting, work, family matters (children, daycare, other expense), and your general "non-luxurious" lifestyle. The latter is one area where the Trustees are not forgiving.

Here's a perfect example of dealing with the Chapter 13 Trustee. I travel for work. The Trustee wanted me to back out my personal meals and transportation expense from my means test (or count it as additional income). I countered that I'd remove that but I'm going to claim the 5% exception. So we both won and it was nearly even. She got to get me to back out my meals, and I got to still claim the 5% exception. But that took "knowing" the system and I became very good with caselaw and dealing with the special exceptions. Not every attorney is going to know this and will likely tell the debtor to just comply (e.g. back out the meals).

At least, that has been my personal experience combined with the thousands of members here on BKForum.

[shipo]

If there's one thing I've learned from this site, there are BK lawyers, and then there are BK lawyers who know how to help their clients. I was fortunate in that, even though I didn't know what I didn't know regarding Chapter 13, I interviewed a few lawyers and chose the one who seemed most interested in me and my issues. She got my monthly down to a manageable point where I only had one "drama" moment in the entire five years. Even then, the issue was relatively trivial, I was driving down to New Jersey when the alternator in my car croaked. I stopped at the closest Honda dealer, who just happened to have a brand new alternator in stock and had time to get my car in the shop, and of course they had time to charge me over $700 for the freakin' alternator. Gulp! Fortunately I was able to use my online banking app to move some money from my "rainy day fund" into my checking account and then use my debit card to pay for the repair.

[Vball]

Chapter 13 was a godsend for us. We couldn't afford anything before we filed. Inspections, tires, clothing. Lived without TV, cuddled up in the cold as we couldn't afford heating our house above 60. Could only afford like $100 for groceries a week for a family of 4. Our credit card bills were $2000 a month on a $4000 a month income.

Once we filed, all our credit card bills were gone, and we paid less than $300 a month for the chapter 13 bankruptcy. We had an extra $1700 to buy stuff we needed. It was like winning the lottery in the sense that we became normal people. We could buy new underwear, have internet, have TV, go to a theme park in the summer once in a while. We could go out to movies occasionally. We could heat our house and buy A/Cs in the summer.

Given my situation, I don't get how some people are suffering barely able to get by. Our lawyers took into account how much it cost to pay for our housing, taxes and cars (which we paid outside of the bankruptcy payment), clothing, gas, baby diapers, groceries, sanitary, internet, tv, electricity, heating, cooling, maintenance, etc. We were living on way below what the minimum standard of living was for a family of 4 in our state, and that was all taken into account.

You must live in a state with different allowances. Where I live only $700 is allowed for rent/mortgage. Our rent is $1350 and where we rent is way below market value, simply because we have been there for so long. So there's $650 off that bat that we have to pay yet can't get a proper allowance for. (Our state is very low income, however, we live in a high cost of living part of that state). We also have a daughter in college that we have to pay about $5,000 a year for tuition - but tuition is not "allowed" for anyone over 17. That's just crazy! I get that you shouldn't be able to afford to pay your kid's way through Harvard Law while bankrupt, but a reasonable amount like $5k/year should be fine.

Our lawyer set our payment at $1050 - which hurt a lot - and the trustee kept denying it, wanting over $1,500/mo. We converted to a chapter 7 after 6 months.

[shipo]

You must live in a state with different allowances. Where I live only $700 is allowed for rent/mortgage. Our rent is $1350 and where we rent is way below market value, simply because we have been there for so long.

Maybe I'm missing something, but if I recall correctly, just because one has an expensive rent/mortgage well beyond the "allowance", that does not preclude them from being able to justify the higher amount.