Spending Cash Before Filing?

[nioka]

I am filing for BK just after the first of the year.

My grandson asked me for something costing about $550 for Christmas. I had already gotten him something but I thought why not. I would not be using a CC. I could buy this item with my bank debit card or PayPal.
I have a few extra dollars because I am not paying my bills. I would still have enough to pay my attorney.

My question is how would it look if I make this purchase and then file for bankruptcy? Then again this brings up having an excess of funds in my checking account if I don't spend it. I am in TN and I believe the exemption is $10K. I am no where close to that figure.

[keepmine]

Nobody cares about a Christmas present.
You're not under the thumb of the trustee. You can spend your money as you see fit.

[bcohen]

Of course, you should spend down your non-exempt funds before you file for bankruptcy! Make sure to take care of any medical/dental issues you have been delaying, any deferred maintenance to your car, stock up on food and refill your prescriptions, replace your old worn-out clothes, and so on. Pay very close attention to what your state allows for exemptions, and make sure to plan your filing accordingly!

As a side note, remember that until and unless you file, you are not under any legal obligation to pay anything toward any debt, and are free to hide assets, give money to family, and spend your money as you see fit. It is only upon filing that you must not do these things. Once you file, the trustee may request bank statements to see if you have made any LARGE withdrawals or transfers, etc. If you take out $500 now, to buy Christmas presents, I guarantee the trustee won't bat an eye. If the money is already in your house, in cash, then the trustee won't even know how you spent it.

[AngelinaCat]

As a side note, remember that until and unless you file, you are not under any legal obligation to pay anything toward any debt, and are free to hide assets, give money to family, and spend your money as you see fit.

bcohen, I must respectfully disagree with this advice.

You know good and well that the trustee can look back for up to two years to seek out hidden assets. While this may be possible to do with out paper trails, it is unethical to do so, and we here at BKForum may not and will not condone such actions, as per the Forum Rules:

http://www.bkforum.com/announcement.php?f=3

Specifically:

"All BKF users agree not to discuss, engage, or encourage any behavior or activity which violates the law. Discussion of drugs, violence, murder, theft, vandalism, fraud or any other issue which could be used to help individuals break the law is strictly forbidden."

I am sorry to be a 'party pooper', but I would not be doing my job if I did not post this.

Thank you

[justbroke]

I would add that a bankruptcy case can always be re-opened by the Office of the United States Trustee (OUST), or the Panel/Standing Trustee for any late discovered asset(s) or for actual fraud, at any time (even years later). It is simply not worth it, in the long run, to hide assets with the intent to hinder, delay or defraud creditors (or the Bankruptcy system).

[AngelinaCatHub]

Mrs. and I always and will forever, have our own opinions. I partially agree with both. Mrs. stated rules and regs that are accurate. Bcohen states accurately too that until you file, you have no obligation to anyone or anything. Caviot on this is: YOU ARE NEVER ALLOWED TO HIDE ASSETS BEFORE, DURING, OR AFTER BANKRUPTCY. That being said, after filing, a look back is possible. Usually amounts at or above $600 will trigger a question. This may or may not happen. It depends on many circumstances.

My opinion for all it's worth is, I doubt this would be a problem. Christmas is to many, a special time (it is to us). If I were in the OP's position, I would give that gift. Worse case condition would be; become an asset case, the Trustee more likely to allow a pay back but for that bitty-bit amount it would not be worth the trouble.

I say, give the gift. (I'll fight with the wife later. LOL).
'Hub

[AngelinaCatHub]

OK, JB just stuck in before I could finish, the error in the ways of hiding assets. That gets Trustees and Judges really P.O.ed.

Keep EVERYTHING out in the open and honest. You will be under a FEDERAL COURT and they easily get Pizzed.

As to the subject at hand, I still remain opinionated that that gift would not be a problem.

Let's not make more of this than it is. 'Hub

[AngelinaCat]

At no time did I say NOT to give the gift. That is fine.

My quarrel was with bcohen's phraseology of:

As a side note, remember that until and unless you file, you are not under any legal obligation to pay anything toward any debt, and are free to hide assets...

[jst4f]

It is true that you 'may' have to account for all expenses for up to two years, usually only 6 months. You should be ready to account for your expenses, the larger the expense the more likely you will be questioned. We were not questioned on explicit purchase but how we spent our tax return. Keep in mine that you don't list your purchases but instead your balances in banks, etc. You need to be ready to discuss any significant changes in these accounts. That said you are allowed living expenses including nominal Christmas presents. Nominal is a relative term subject to TT and/or regional interpretation. I recommend that you talk to your lawyer before buying a $550 present.

[AngelinaCatHub]

Well as I feared, a tempest in the Teapot. So, how can I say Mrs. is in error? She is not. How can I say the above posters are in error? They are not. All in all, it is such an insignificant amount and the reason is so selfless that I cannot see a Trustee or Judge complain. AGAIN, let's not make this an issue. Buy the dern present. Enjoy the Christmas. GBWY 'Hub

[LadyInTheRed]

Do not give a gift of that size without talking to your lawyer first. In question 7 of your statement of financial affairs, you will have to list gifts worth over $200 made to family members within a year of filing.

I would a l so stop and consider seriously weather spending that much on a Christmas gift is wise. Is this kind of spending what got you to where you are?

[TXskyblue]

I would a l so stop and consider seriously weather spending that much on a Christmas gift is wise. Is this kind of spending what got you to where you are?

Much truth here. This Christmas I wanted to buy a new TV because my old, perfectly functioning 42" HDTV is kind of small for the living room. Then I thought about what I did that caused me to file bankruptcy and decided to spend that money to pay down my mortgage.

[TXskyblue]

I would add that a bankruptcy case can always be re-opened by the Office of the United States Trustee (OUST), or the Panel/Standing Trustee for any late discovered asset(s) or for actual fraud, at any time (even years later).

Isn't there a statute of limitations on how far they can go back and reopen a BK case?

[justbroke]

Isn't there a statute of limitations on how far they can go back and reopen a BK case?

There is no statute of limitations for reopening a case based on 11 USC 350(b). The only place where the Trustee must act within one year of discovering an issue (fraud or unknown assets) within 1 year of a case being closed, is found in 11 USC 727. That limitation is really about the revocation of the discharge. Outside revocation of the discharge, the law in 11 USC 350 does not mention a time -- only that a case may be reopened at any time to administer assets, to provide relief for the debtor (think motion to determine secured status), or other cause.

If it were not for 11 USC 350, it would be quite difficult to reopen an old case to seek sanctions against a creditor that continues to dun you. Or, for the debtor to reopen the case to get a ruling as to whether a particular debt was actually discharged. This is an important function of the bankruptcy court and is probably the most powerful tool for the debtor to protect him/herself from creditors that would violate the permanent discharge injunction.

[AngelinaCatHub]

Well back to the "tempest" of the gift.

It has always been a consensus to spend down cash on exempt things before bk. Things like food and other essentials. Now the OP states that cash in bank account is exempt to 10K. If this is so, what is the problem with using exempt funds to $550? Of course put it down and mark it on the form AS A CHRISTMAS GIFT. Tennessee has a $4000 wild card exemption. 'Hub