cash question.

[monkatom]

OK I know this is strange but we have about 1400 in the bank that we do not want to exempt since we will be using all of our exemptions on cars and tax return. So I had planned to spend it. We have been spending like crazy the last month on clothes towels, vacuum, purifiers, etc. It is not that we would normally have extra cash but we sold an asset to pay taxes, insurance and bills, plus my wife only gets paid 10 times a year so normally we would save money for the summer months which we can not do now. My concern is will the trustee have issues with us blowing through like 3K on clothes, etc in the month before we filled. If not any ideas on how to spend it as we already bought most things we could think of. One final note and please do not beat me down over this but what happens if we say bought a new set of pots and pans for 250 bucks and realized a couple of weeks later we did not need them and returned them for the cash. Then we could use said cash for bills over the summer when we do not get a check??

[monkatom]

any thoughts?

[Catia]

I would think from what I have read that your trustee will question excessive spending just before BK, their job is to purposefully look for just that--for at the least, 90 days before filing. You need to know where it is safer to spend this money without causing additional problems in bk.

Certain things I would assume you could potentially get around, again, I say "assume"--like food...and/or hygene related items for the household--because these are essential--but I am not positive about this. Also perhaps stocking up on prescribed meds--some pharmacies allow prescriptions to be filled for up to a year--this is something to look into if you are on meds--not having to worry about paying for them for a year after BK can really help your stress level!!!

LOL-- I plan on packing full my entire pantry and every cabinet with storable healthy provisions/foods (rice/beans/flour/sugar/grains/oatmeal/pasta/coffee/tea/canned goods etc), packing my freezer full of meats. And also having a years worth of necessities soap/shampoo/laundry detergent/bleach/cleaning supplies/toilet paper/pet food/personal hygene items--cuz these items are expensive, and who knows what I will be able to afford afford after BK, so having a years worth reduces anxiety and saves time...Many people may thing this seems excessive, but, for me, it is not. I do not like having to shop anyway, so much of this preparation will save me time and gas $$ for the yr after BK, and I can just get the basics like milk/bread/fresh vegies as needed, and every thing else will be at home already. LOL, I know how to plan for a yr of storage of food and provisions though, was taught by my depression era grandparents, many people do not know how to do this, but it was drilled into my head from birth lol !!! but I usually practive this 3 times per year instead, because it does take a lot of thought and preparation, and you must have the space.

Someone please correct me if I am wrong, but aren't there certain 'priority' types of debt that this does not pertain to?
Like for instance paying various taxes, or using the cash to pay towards equity in certian exempted items?
There are rules pertaining to how money is to be allocated. I do not know how they 'prioritze' certain debts over others, someone who does know their formulas--please chime in, as I am interested to know as well.

[monkatom]

I hope the trustee will not have issues as our lawyer told us to purchase clothes etc. Plus since my son was diagnosed with asthma the doctor suggested getting a new vacuum, air purifiers, and linen to help with dust/mold. We have not purchased luxuries I do not think? The only problem may be if he looks at all receipts as we have purchased some gift cards for food/gas to help over the summer months since we are not able to bank cash and will struggle over the summer until everything works it's way out.

[TabulaRasa]

I would think from what I have read that your trustee will question excessive spending just before BK, their job is to purposefully look for just that--for at the least, 90 days before filing. You need to know where it is safer to spend this money without causing additional problems in bk.

What do you mean by excessive spending? I am aware of using credit cards prior to BK, but are you saying cash use (from your checking account) is a 'no-no?'

[epiphany]

I hope the trustee will not have issues as our lawyer told us to purchase clothes etc. Plus since my son was diagnosed with asthma the doctor suggested getting a new vacuum, air purifiers, and linen to help with dust/mold. We have not purchased luxuries I do not think? The only problem may be if he looks at all receipts as we have purchased some gift cards for food/gas to help over the summer months since we are not able to bank cash and will struggle over the summer until everything works it's way out.

Your purchases do not sound at all luxurious to me. I wonder if anyone knows if you can prepay some utilities and not have the "credit" on those accounts considered assets?

EP

[Catia]

Theoretically, over paying your utilities to have a credit on them is considered "preferential transfer"...From what I understand. That means you are showing preferential (favoritism) of one creditior over another, and the trustee can "avoid" that--meaning reverse it.
***Usually trustee will not avoid a preferential transfer of less than $500-$600. ***
I read a review about 2 cases that explained it to me-case 1 where a father did several preferential transfers to his daughter in the year before BK--1 check each month for $500, over 12 months =$6000. Trustee did not "avoid" this, because it was 12 seperate transactions, for less than $600.
Case #2, father gave daughter $5000 in 1 lump sum in year before BK. Trustee avoided (reversed) this transaction, because it was 1 transaction for a lump sum which was over their acceptable amount for preferential transfers.
So even though case#1 received more $$, it was the amount and the way it was transferred which allowed it to not be avoided.
It appears IF you have the correct info, and IF you understand how to go about the process, you can do these transfers and have them remain.
I however do not know how it would work if you had say, 12 gift cards/prepaid credit cards/prepaid gas cards for $500 though. Usually these are anonymous--but, if you purchased them using a CC or debited direct from your bank account, there will be a definate record of their purchase. Seems it would be wise to take no more than $500 CASH from your bank account and spend cash to purchase these cards, not leaving a questionable paper trail.

Anyone with experience how this works?

[Cali]

Theoretically, over paying your utilities to have a credit on them is considered "preferential transfer"...From what I understand. That means you are showing preferential (favoritism) of one creditior over another, and the trustee can "avoid" that--meaning reverse it.
***Usually trustee will not avoid a preferential transfer of less than $500-$600. ***
I read a review about 2 cases that explained it to me-case 1 where a father did several preferential transfers to his daughter in the year before BK--1 check each month for $500, over 12 months =$6000. Trustee did not "avoid" this, because it was 12 seperate transactions, for less than $600.
Case #2, father gave daughter $5000 in 1 lump sum in year before BK. Trustee avoided (reversed) this transaction, because it was 1 transaction for a lump sum which was over their acceptable amount for preferential transfers.
So even though case#1 received more $$, it was the amount and the way it was transferred which allowed it to not be avoided.
It appears IF you have the correct info, and IF you understand how to go about the process, you can do these transfers and have them remain.
I however do not know how it would work if you had say, 12 gift cards/prepaid credit cards/prepaid gas cards for $500 though. Usually these are anonymous--but, if you purchased them using a CC or debited direct from your bank account, there will be a definate record of their purchase. Seems it would be wise to take no more than $500 CASH from your bank account and spend cash to purchase these cards, not leaving a questionable paper trail.

Anyone with experience how this works?

But isn't utilities a necessity so why would that be looked as preferential?

[MajorMike]

Also, every district and trustee are different. We didn't even have to give a copy of our bank statements to our attorney OR trustee. It's all different everywhere.

[lrprn]

I hope the trustee will not have issues as our lawyer told us to purchase clothes etc. Plus since my son was diagnosed with asthma the doctor suggested getting a new vacuum, air purifiers, and linen to help with dust/mold. We have not purchased luxuries I do not think? The only problem may be if he looks at all receipts as we have purchased some gift cards for food/gas to help over the summer months since we are not able to bank cash and will struggle over the summer until everything works it's way out.

No worries, monkatom. What you are purchasing will be fine - they are normal living purchases. The gift cards are not likely to tip the trustee's radar either if the amounts on each card is less than $600.

Catia, the case you refer to got into trouble because the transfer was cash for more than $600 and went directly to an insider within 90 days of filing. What monkatom is doing is pre-planning for bankruptcy. There's nothing wrong with spending cash for necessary living expenses that aren't luxuries before filing. Smart filers do it all the time.

[One Half Full]

What confuses me about this thread is if it is about a chapter 7 or a chapter 13.
With Ch 13, I can see "stocking up." with chapter 7, arent all your debts discharged? You will be doing much better after the BK. I agree with the notion that pre-planning is important. Even if you stock up on "basic" food, aka rice, beans, freezer stuff, no frills stuff, and things like toilet paper, female needs, medicines, a pair of shoes or two, and so on, I can see it. From the POV of the trustee, I really don't see a new set of 200 dollar pots and pans, just as I would not see a health club membership, or 3000.00 worth of clothes.

Although I see the pots and pans as regular living expenses, and actually a "cheap set" as it goes, I wonder if the trustee would have pointed you in the direction of the nearest salvation army. Don't know. Just speculating.

[ssdsco]

Let’s say I'm filing chapter 7 and have $1500 in cash that's not exempt. I take the $1500 and buy a flat panel TV and stereo system a couple days before filing. I list the TV and stereo in the BK inventory at 70 percent of what I paid and can exempt them via the states household goods exemption. This will be a very obvious transaction on my latest bank statement that the trustee will probably request at the 341 meeting.

Is there anything in the BK code that says this is illegal ?

Thanks

[lrprn]

I wonder if the trustee would have pointed you in the direction of the nearest salvation army. Don't know. Just speculating.

Those of us in bankruptcy tend to give trustees almost magical powers to see into our specific purchases and object. In reality the vast majority of trustees are looking only for the high dollar return 'easy kills' - not whether you spent $100 more at WalMart this week. Trustees have neither the time nor the resources to investigate every purchase decision made by every one of their filers.

You have to either get the trustee from hell (and frankly they are rare) or do something very foolish (give your mother $5000, buy a $5000 piece of jewelry, or take a $5000 luxury cruise a month before you file , etc) to get yourself into hot water with your trustee whether you file 7 or 13.

[ssdsco]

Those of us in bankruptcy tend to give trustees almost magical powers to see into our specific purchases and object. In reality the vast majority of trustees are looking only for the high dollar return 'easy kills' - not whether you spent $100 more at WalMart this week. Trustees have neither the time nor the resources to investigate every purchase decision made by every one of their filers.

You have to either get the trustee from hell (and frankly they are rare) or do something very foolish (give your mother $5000, buy a $5000 piece of jewelry, or take a $5000 luxury cruise a month before you file , etc) to get yourself into hot water with your trustee whether you file 7 or 13.

[monkatom]

as far as the gift cards go it is usually 25 or 50 dollars every other time I go to the grocery store. It will be a chapter 7 and the reason i am stocking up is my wife will not receive a check during the summer and since i can not stockpile cash in the bank to cover those months i am stockpilling gift cards to use during the summer months. Then after the BK I will start setting aside money for the next summer etc just can not do it now.