Would Trustee See This as Fraudulent

[SinkingFast]

We need some serious $$$ to pay income taxes. We don't have it. And the only place we can get it is from equity we have in a vehicle.

There are 2 ways we can go about this.

Sell the vehicle and hope it brings enough quickly enough before we file BK.

Refinance the loan to the max we can get on the vehicle.

I read at one attny's website there are certain things that are taboo to do in planning your BK. Don't max out your cards. You can't give away things that have a value greater than $600. You cannot transfer assets. This attny did say converting cash in to exemptable assets was OK to do. He went on to say if you do something that is ethical by any other standards, done in good faith, and disclosed to the Court up front, it shouldn't cause a problem with the BK. So either one we do, we'd most certainly tell the Court about it and why we needed to do it.

Selling or refinancing, either way, could look fraudulent to the Court. But we need the money to pay the IRS and we've got to do something. We would, of course, file our taxes and send the IRS the money before filing BK.

[StaciMM]

I think you would be fine to sell your vehicle and use the $$ to pay taxes. Assuming you got a fair price and didn't sell it to friends or family. And, paying taxes does not create a preferential transfer as they are a priority creditor.

Taking out a loan on the equity, on the other hand, could cause a problem. To do that, you would be taking on an extra monthly expense at a time when you know you're going to be filing. That I think could be seen as bad faith, a bit like you're padding your monthly expenses. (I don't think it would matter too much where the money went.)

[SinkingFast]

You voiced our concerns, Staci.

But, I think you just explained something else to me, Staci.

One attny flat out said no to the refi. She felt a refi on the "eve" of filing BK would look like a fraudulent move to the Court.

Another attny said we could refi. I didn't know if he was making a flip comment or not. But he also said something else during that part of the conversation when we asked about raising money for our taxes. He asked if we had tried to sell the vehicle. Had we advertised it anywhere in an attempt to sell it. I wonder if he was thinking, but did not say to us, that a refi could be OK as long as we had made a good faith effort to sell and weren't able to. Hummmmm..........

[bkfiler]

remember that some things allowed by one trustee isnt by another trustee and then again allowed by that same trustee a month later.

its a lot of variables. depends on the number and on your own situation and anything else they see you doing on your bk petition.

my best way around this problem would be to keep on asking more attorneys. and i dont mean a few. i mean get out there and consult with even more. track the votes and compare answers.

irs loans arent that expensive buy the way. wouldnt that be cheaper?

[SinkingFast]

Well,..............

You guys are so right that people filing BK really need to be pro Active in their own case.

I worried about the expenses issue. Yes the vehicle is an asset, but we also make a monthly payment on the loan, buy gas, insurance, etc. If we sell, there's a lot of expense $$/month we loose. It's the one and only reliable vehicle we own. The other ones all had repairs last year at some point. We spent a car payment/mo just on repairs alone for them. We ain't talking tires or oil changes. We're talking brakes, water pump, etc. And, it's the one and only vehicle we own that we can get our entire family into to go any where. I'd rather deal with finding a way to cover the asset issues than to sell and hope we can buy a replacement after BK.

We were feeling rushed about filing BK. Wanted to beat the mortgage lender to the punch on foreclosure due to "quick foreclosure" laws in old home state. Also, attnys led us to believe we could dodge Capital Gains by taking the house thru the BK with us.

Guess what???!! Bill Clinton fixed our Capital Gains problem for us. The Taxpayer Relief Act of 1997 expressly excludes CG for all home sellers up to $125K/individual and $250K for joint sellers. Regardless of age. There are qualifying criteria. Primary residence for last 2 years. Purchased more than so many years before. Etc. We meet the criteria. And if you are over 55, and had already taken your 1 time sale under the previous law, you could now take it again and not worry about CG. I don't know what paperwork we have to do, as I am still learning. It seems we could go ahead and do a Deed in Lieu to the lender and not worry about CG. We just need an attny to draft a statement to the effect that we aren't liable for any deficit if they don't sell the house for what we owe. A CYA for us so to speak. And get the lender to sign that they agree to our terms in advance.

If that's all true, and we could get the DIL, then we could delay quite a bit longer bef filing BK. Get us the time we really need.

[StaciMM]

That is good news!

[bkfiler]

sounds to easy to me. id ignore it and keep acting like there is a problem lol.

[SinkingFast]

I gotchya about different Trustees and what they will or won't allow on any given day, BKF.

I don't follow what you mean about ignore it and keep acting like there is a problem??

[StaciMM]

I think he means to not get too relaxed, to keep researching/studying as you have been.

[Graphic]

Well all I can say is my vehicle is for sell now. Once sold, it is being sold at fair price, I am using the money on exempt items. I've had 3 attorneys told me this was fine and the one that I'm going with I plan to go to his office with a list of things I am going to buy to make sure it's ok ahead of time. So if I go in there and the trustee says it is fraudulent, I have a nice malpractice case on my hands and I'm sure they won't like that so..

[SinkingFast]

Even if we can do the DIL and avoid Cap Gains, providing we can get the lender to agree not to hold us responsible for any deficiency. That just gets one monkey off our backs. We can't even begin to pay back the CC debt, and there's the income taxes we owe to deal with. So there's still plenty to worry about. No chance really to relax by any means.

Just last few days were all doom and gloom. We knew we'd owe taxes. Just didn't know how much. Find out we have huge tax debt. No way to pay the taxes. Foreclosure looming pushing us to file BK before we were ready.

Even tho it'll take work, it's kinda looking like we may have finally caught a break. Again, that's if the lender will agree to a statement we submit with an offer for the DIL. If the lender doesn't, we're back in the "rush to file" boat again.

[StaciMM]

From what I recall, the home issue was the main reason you were trying to file quickly. I also believe you've said you had been current on all payments to credit cards, etc. If the DIL works out, then you should be able to put at least several months between your last major activity on your cards before filing. Generally, they wouldn't go to collections for at least 6 months, and a few months more before judgements happened. AND if they did try for a judgement, you'd have at least a few weeks notice.

[bkfiler]

accounts get collected on within 3 months. not 6.

attorneys get involved for civil suits for at least another 3 months from my experience.

these are minumum times imo. anything can happen of course. it took 1.5 years for 1 to sue me. and that was for a huge chuck of change too.

[StaciMM]

Of course, 'personal experience' will vary with all of us as we've had different creditors, different payment situations, etc.

[bkfiler]

ill let you slide honey, but just between you and me - you are wrong