Spending money before BK

[Wantmypeace]

I'm wondering if every expense on my bank statements will be scrutinized by the trustee when we file in February. For example, my son sold his PS3 for 265.00. For Christmas, I told him we'd pay the extra 35 plus tax to get him an Xbox. So, my bank statement shows a purchase from Amazon for 300.00. Am I going to have to explain all of these purchases to the trustee? Or, will he/she be looking for larger expenses? 300.00 is a LOT to us, so I don't know what the trustee will be looking for...

[tobee43]

we had two accounts....so that was 12 bank statements and the trustee didn't question anything at all...we had all our expenses and then some. since we used on purpose our checking accounts for everything...that way we were hoping it was seen where all our money or how our money was going in and out.

[Wantmypeace]

So, for those who file in January through June, Christmas is a problem. We don't spend a lot on gifts, but is any spending on gifts allowed at all? Will the trustee have a problem with us spending money on Christmas gifts?

[tobee43]

we filed in april...so the question never came up. maybe someone out there filed around the same time period as you are.

i even think with the chapter 13's there are some allowances for birthdays and such. i mean we are real people after all, most with kids...so really personally, i would think if you spent a reasonable amount what could they say....i hope someone reads this that actually did it and went to a 341...

but just a thought...if you file in feb....try and do your filing towards the end of the month?...and then you will not even have your 341 for at least 4 weeks....with us..actually we had to wait 8 weeks...by that time the trustee shouldn't hopefully be looking at xmas!

[LadyInTheRed]

I believe the trustee is only looking for things like (1) your cash balance on date of filing, (2) deposits that appear to be in excess of the income you reported (2) large cash withdrawals or transfers suggesting you may be hiding cash (2) large payments that might suggest you made preference payments, fraudulent transfers or purchases of valuable assets you did not report.

I don't think paying cash for modest Christmas gifts in line with your normal gifting habits will be a problem.

ETA: Just a guess, but it may be a good idea to avoid making any gifts that you would have to report in question 7 of the Statement of Financial Affairs:

7. Gifts
List all gifts or charitable contributions made within one year immediately preceding the commencement of this case
except ordinary and usual gifts to family members aggregating less than $200 in value per individual family member
and charitable contributions aggregating less than $100 per recipient. (Married debtors filing under chapter 12 or
chapter 13 must include gifts or contributions by either or both spouses whether or not a joint petition is filed, unless
the spouses are separated and a joint petition is not filed.)

[Wantmypeace]

Okay, good deal! I'm trying to be really meticulous about this process. I'm gathering the paperwork for the attorney now, and we have an appointment Jan 4th to go over everything. He said it will take him 3-4 weeks to prepare everything, so we'll probably sign papers the first or second week of February. I can put it off a week or two if needed, also. There's just so much to consider, and I don't want to make any mistakes!

[tobee43]

Okay, good deal! I'm trying to be really meticulous about this process. I'm gathering the paperwork for the attorney now, and we have an appointment Jan 4th to go over everything. He said it will take him 3-4 weeks to prepare everything, so we'll probably sign papers the first or second week of February. I can put it off a week or two if needed, also. There's just so much to consider, and I don't want to make any mistakes!

you'll do just fine.. i know it's been trying and now with the holidays it makes us realize every dime...but it will be ok...just like lady says they are looking for small amounts used for christmas..

[helpme2010]

I think ordinary expenses will be fine. If you need to buy ordinary bday/xmas presents, then that will be ok. I think trustees will question when people do outrageous expenses. I sat in the 341 hearing and listened to those the trustee questioned, and it was mainly just a few that had some outrageous very high business type expenses. If you are doing your regular routine, you should be fine. If you are trying to run up a ton of expenses to try to take advantage of the situation, then be prepared you may get flagged.

This board made me far more paranoid than I needed to be. But better safe than sorry, so it's always better to be safe than sorry.

[angles]

[QUOTE=helpme2010;478089]

This board made me far more paranoid than I needed to be.QUOTE]

...Same with us. I was paranoid about a 50.00 charge at Autozone for a car part and how I might need to justify that expenditure to the trustee. Our attorney (who is also a trustee) stated that we were being way too conservative and that the trustees generally look for large transfers, like around 3-5K. But we were still careful and kept receipts just in case.

[ssmdem]

[QUOTE=angles;482151]

This board made me far more paranoid than I needed to be.QUOTE]

...Same with us. I was paranoid about a 50.00 charge at Autozone for a car part and how I might need to justify that expenditure to the trustee. Our attorney (who is also a trustee) stated that we were being way too conservative and that the trustees generally look for large transfers, like around 3-5K. But we were still careful and kept receipts just in case.

Same here, my attorney is a trustee as well too, and she joked about my box of receipts and how I could tell you to the penny what every purchase was for. Thing is, all purchases have been under $100, and she said, "They are NEVER going to question that. Have you bought anything for more than $1000???" I looked at her like she was crazy and said "Hey, we're bankrupt -- who has that kind of money?" We were joking around, but her point was, we're fine - quit worrying - the trustee isn't going to question a thing on our pitiful bank account.

[helpmeout]

So, for those who file in January through June, Christmas is a problem. We don't spend a lot on gifts, but is any spending on gifts allowed at all? Will the trustee have a problem with us spending money on Christmas gifts?

I filed in February 2010. Nothing was said about what I spent on Christmas. But I also didn't spend more then $400 for my kids and their two cousins (the only other kids in the family that we get gifts for). And that includes a cheap fake Christmas Tree (my evil cat pretty much destroyed 2 fake trees already, this year he is contenting himself with undecorating the bottom part). I am spending more this year, but then I am in a better position this year.

I think that as long as you don't go out and buy very expensive gifts, you should be okay. And don't use credit cards.

[Wantmypeace]

Okay, I'm not as worried now. I've worried about all kinds of things with this, but my bank statements are the biggies. I have all my receipts, but still! I've even been worried about pulling out cash for groceries and gas. We've been doing Dave Ramsey for a while now, and we try to use cash for gas (which means I pull out 300.00 and give it to my husband for his gas expense at the beginning of the month). I was worried that the trustee would want to know where the cash was. I guess I am being too paranoid.

[ssmdem]

Okay, I'm not as worried now. I've worried about all kinds of things with this, but my bank statements are the biggies. I have all my receipts, but still! I've even been worried about pulling out cash for groceries and gas. We've been doing Dave Ramsey for a while now, and we try to use cash for gas (which means I pull out 300.00 and give it to my husband for his gas expense at the beginning of the month). I was worried that the trustee would want to know where the cash was. I guess I am being too paranoid.

I think that's a good practice to get into. I didn't before filing because I wanted the purchases outlined on my statements, but if you've got your receipts, it's the same thing. You can clearly show where the money was going.

I just am not crazy about using my debit card frequently. When we were using credit cards, I had several incidences of fraudulent charges and I don't want my checking account to be so vulnerable. I used Dave's envelope system YEARS ago before he was even a big name, and it really helped us keep things in check. Just go to the file and pull out the budget envelope you need. I kept my gas envelope in my glove compartment so I wasn't tempted to use it for other things. Grocery envelope stayed by the grocery list in the kitchen. Misc envelope I pulled out of the bank weekly and kept in my wallet. Once it was gone, it was gone. Seems so simple. Wish we had never gotten out of that habit, and we probably wouldn't be in the mess we're in now.

[Wantmypeace]

Yah, we LOVE Dave Ramsey, and even though he's totally against BK, there are times when it is necessary. I will continue to follow his program throughout and after our BK. I am sure it will keep us from ever getting into this position again!