Recent spending prior to chapter 7 filing

[KatieEllen24]

Can anyone tell me if spending cash or using my debit card to buy about $600 worth of Christmas gifts will be a problem?

I'll be filing chapter 7 later this month. Haven't paid or used credit cards in 5 months. Pretty much just pay my car and mortgage plus food, gas, etc.

Will my bank account be reviewed to analyze my recent spending?

I've been unemployed for 10 months. Income is from unemployment, pension and IRA withdrawals.

Thanks for any feedback.

[scorpion35]

Can anyone tell me if spending cash or using my debit card to buy about $600 worth of Christmas gifts will be a problem?

I'll be filing chapter 7 later this month. Haven't paid or used credit cards in 5 months. Pretty much just pay my car and mortgage plus food, gas, etc.

Will my bank account be reviewed to analyze my recent spending?

I've been unemployed for 10 months. Income is from unemployment, pension and IRA withdrawals.

Thanks for any feedback.

well lets see
u are unemployed,collecting unemployment benefits haven't paid your credit card bills in 5 months ,yet u manage to give christmas gifts worth $600?
not a wise decision.
you will have to provide 3 months to 1 years's worth of bank account statements
i don't think it will be a problem but the trustee might question it
u will have to disclose it when filing the paperwork


good luck

[debee]

Can anyone tell me if spending cash or using my debit card to buy about $600 worth of Christmas gifts will be a problem? Will my bank account be reviewed to analyze my recent spending?

The degree of analysis varies depending on the particulars of your case. If you're an over-median debtor, or if you were high-income prior to unemployment, evidence of high-income lifestyle (expensive house, car, etc), if you have moved a lot of big money/assets around in the last couple years, your case will get more trustee eye-time. Normally, the trustee looks at bank records to see if there are any preferential payments that can be avoided, any fraudulent transfers, money in account on day of filing, anything that can be grabbed for creditors and trustee's wallet. They don't care what you spent at Safeway or Walgreen's. If you have made cash withdrawals, good idea to hang onto your receipts so you can document what you bought.

As for the $600 Christmas gifts, it depends. If it was one gift for one person - like a home depot gift card for your brother or a diamond studded tie pin for hubby - that might raise an eyebrow. But if it was several gifts for several family members, I don't see a problem. Question 7 of form B7 (Statement of Financial Affairs) asks you to list gifts given in the last year except ordinary and usual gifts to family members aggregating less than $200 in value per individual family member - so if you spent less than $200 per family member, you don't even have to list it.

[KatieEllen24]

I would say that I am an over median debtor. I had a six figure job and live in a nice house. It's worth less than I owe however. The gifts were for my 17 year old daughter and 21 year old son who is away at college. A couple hundred each total.
The only true asset I have is my IRA. I have to take money out of it each month to pay my mortgage. As soon as I can get out of this house, I will. The money for gifts came from the IRA.
Right or wrong, what can the impact be? Will I have to pay the trustee this amount?

[debee]

This question is really designed to catch fraudulent conveyance and people who are giving away assets so as to keep them from creditors. I don't think you're going to have any problems with the Christmas gifts for your kids. I've never heard of anyone having to pay the trustee in this circumstance, but that would be the worst thing that could happen.

Have you gone in for a free consult or hired an attorney? If not, you may want to do that quickly to make sure you are taking all the right steps leading up to filing. Whether you are an over-median debtor depends entirely on your income (including IRA withdrawals) over the 6 months prior to filing. If you are planning to give your house up as part of the bankruptcy filing you may want to stop paying the mortgage with exempt IRA money now.

eta: In Michigan, median income for household of 1 is $41,875; 2 is $49,919; 3 is $59,190; 4 is $70,600

[KatieEllen24]

debee - Thanks for your input.

I've hired a lawyer and was preparing my data when I realized I'd used my debit card for Christmas.

I misunderstood your comment about median debtor. I qualify for chapter 7. My current income is below the state guidelines.

I plan on keeping my house for a year or two. Rent would be as much as my mortgage payment. I'm OK with using the IRA for a while.

I just got a little scared. This has been really dragging me down and I thought that I'd really screwed up at the last moment.

Katie