preferential payments

[oldbaddebts]

First off, please don't think I am judging you personally. I was using gambling as an example. I could have used blowing it on a vacation or something similar. In fact, my husband and I frequented casinos at one point - before we started to have problems with the house, started a family, etc. We didn't take out cash advances or the like, but that's where we spent our disposable income. Nowadays, we still go to the casino, but it's only when we get coupons for free play (which isn't so much anymore) - not to gamble our own money.

Secondly, when you went through your bankruptcy, did they ask you where you spent this money, or did they just assume it was all gambling because you said so? How specific do you have to be when you account for how you spend your money? We bought some new camera lenses for my husband this year but that was because he was trying to get side work as a photographer to earn some cash. He hasn't had any paying jobs yet, so I'm afraid those purchases would be seen as luxury hobby items.

As for talking to family members - that would be all well and good but we will be a one income family after we file. I will have no income and my husband's paycheck will just cover rent, food, pampers, and car/health insurance with about $20 left over each month. That's not enough to be paying back family and friends. I will really have to think about waiting to file for 12 months from when I pay them back. That's a long road...

Another thought. When you file for 13, a lawyer told me I can keep 6 months of wages in a back account for "emergencies". Is that also true in Chapter 7? If so, I could park the money in there and pay back family and friends out of that account AFTER I file. That way, I am reporting the account to the court, and not violating preferential payment rules.

I didn't take offense at all, sorry if I did. In a CH 7, you can't keep 6 months of wages in an account, but you can keep whatever your state allows for an exemption on cash, my state alllows none.

I fully admit I am a compulsive gambler, and choose not to stop. However, as you will see when you get to looking at the forms to file, one of the questions is about gambling losses. I have listed over 80% of my net income. The documentation is in bank statements, advances from employers, platinum players cards, win/loss statements, several offers for free charter flights to casinos around the country with free hotel stays, etc. I am still in the process, but no questions have been asked yet. The gambling is only a small fraction of the debt, the majority is from before I started gambling, hence "oldbaddebts".

[nazstar]

How long do you believe you can hold out until filing? If you can put it off for 16 - 24 months, then you can pay whoever you want in the next few months and not worry about the insiders.

I thought about making the payments and waiting 12 months to file. If I stop paying the creditors and keep current on my needed living expenses, I could make it easily. However, I am concerned that the mortgage company will come after us for the deficit in the mortgage. Here in Florida, foreclosures are rampant and I know a lot of banks are holding off on foreclosing for as long as possible - in some cases, 8 months. But, when I stop making payments to the Home Owners Association (HOA), they will take action to foreclose within a few months and then the bank will be forced to move to protect their asset. So, I'm not sure what to do there. If I make the payments, then am forced to file for bankrupcy because the mortgage bank is seeking a judgement against me, then I'm screwed. I have no idea how long that process can take and I don't know if I can stall for 14 months, if need be.

[SinkingFast]

Florida just updated their Exemptions. Used to be Unlimited Homestead, $1K Vehicle, and $1K other property. Effective July 1, 2007, it's $4K other property if you aren't using the Homestead Exemption.

Florida Increases Personal Property Exemption

The Florida legislature passed a law increasing the personal property exemption in bankruptcy. Under Florida Statute 222.25 as written Florida debtors can claim a $1,000 exemption for miscellaneous personal property. Most bankruptcy debtors have applied this exemption to furniture, cloths, cash and other personal property. Effective July 1, 2007, the exemption is increased to $4,000 for those debtors not claiming or benefitting from a homestead exemption. Many Florida debtors not exempting a homestead can use the increased general property exemption to protect equity in automobiles not otherwise protected by the $1,000 exemption specifically allowed for automobiles.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida

http://www.bankruptcyorlando.com/2007/05/index.html

(4) A debtor's interest in personal property, not to exceed $4,000, if the debtor does not claim or receive the benefits of a homestead exemption under s. 4, Art. X of the 1State Constitution. This exemption does not apply to a debt owed for child support or spousal support.

http://www.flsenate.gov/Statutes/ind...222/ch0222.htm

You'd need to ask attnys in your area if that $4K can be doubles when husband and wife file Joint. If so, that could be a big help to you.

You might also ask attnys if an HOA can force a Foreclosure. Could be all the HOA could do is place a lien against the Deed/Title of the house.

[nazstar]

Thanks for the info. I added that to my list of questions for the lawyer. I know that the HOA foreclosed on a house down the street - she didn't pay HOA fees for 12 months, but I don't know the details other than she was an elderly woman who lost her spouse and just went crazy. Kinda became a hermit and locked herself in there for a year with her 4 gold retrievers. But again, her story is becoming like an urban legend. I'm not sure of the details.

[keepmine]

I will have no income and my husband's paycheck will just cover rent, food, pampers, and car/health insurance with about $20 left over each month. That's not enough to be paying back family and friends. I will really have to think about waiting to file for 12 months from when I pay them back.

I'm going to seriously doubt that bk is going to help longterm in this situation. The goal is to come out of bk in better shape than before. You can't support a family with a $20 cushion. Either, your husband needs to start looking for a better job immediately post bk or you need to change your thoughts about being a SAHM. You don't want to file and be unable to support yourself afterwards. That's a bk wasted.
I'd talk with a lawyer about either waiting a year or more before filing to avoid the preferential treatment issue or, put the money in exempt asets like annuities or IRA's and then file after 6 months or so. After bk, cash 'em out and repay everyone. And of course, there will be tax issues and surrender fees.

[nazstar]

Once the bk is all done, my husband can start billing for overtime again. He can make an additional $500-800 a month in overtime alone. For now, he is refusing all the OT because it throws us over the limit. In addition, I will get a part time job once the dust settles. It's just that for those 6 months, it will be really tight while we force our income down to qualify for chapter 7.

It's not a matter that we won't be able to earn the income to pay back family after everything is settled - its more a matter of they needed these funds back in February and we promised it when we borrowed - I was unaware at the time of these preferential payment limitations.

In the long run, we will be a 2 income family again at some point. Until the children are in school, I will be working from home whenever possible. I have several friends that have approached me about watching their children on a day to day basis, and I have transcriptionist experience. This will all help, but we are soooo close to the median income as it is that I am afraid to start any of that until after the 7 is resolved.

[keepmine]

It's good to hear you're thinking of life post bk. Don't blame you a bit for doing all in your power to keep your income low temporarily.
Too bad you don't have a routine run of the mill bk. You just may have to suffer some collection activity for awhile if you pay back your family.
It's my understanding that the head of a hh wages are exempt from garnishment in Fl. so that may give you breathing room.