Unexpected payment from debtor! If/how to amend schedules.

[mtbc]

We filed chapter 7. A small business has owed us money for several years, with over $70k presently outstanding. We listed the debt as "accounts receivable" on Schedule B. To my surprise, they're planning to send us a payment of $2,000 on it, before our 341. (I could ask them not to, and they probably thus wouldn't, but that feels a bit like bankruptcy fraud!) They know I've filed for bankruptcy, of course I can mention the fact that the trustee might get it if they did.

I don't think it ought to affect most of my schedules, because there is no reason to expect further payments anytime soon -- the debtor is likely to be pretty much out of business themselves within a couple of months, given that they have running expenses, they owe thousands of dollars to various parties, and their only probable income on new sales by the time of my 341 is likely to be a few dollars a day. (Which is why I'm amazed they're sending us such a payment, maybe they're just trying to do nice things before they collapse.) My questions are really:

1. I can fit an extra $2,000 into schedule C without any difficulty -- we're way under on exemptions. If I amend it to include the money, can I probably keep it? (I assume right now the account is the estate's so the trustee would keep any payments on it and turn me into an asset case.)

2. Do I need to amend schedule B? (After all, I listed the account, and now some of it is about to turn to cash.) Or is that instead meant to be a snapshot of how things were at the moment we filed?

It isn't absolutely necessary that we keep the $2,000: I could just give it to the trustee and turn into an asset case. We certainly could use the money given that I expect to be out of work soon, but, on the other hand, simply declaring the surprise payment to the trustee and letting them have it might make them decidedly ungrumpy.

(I fear trustee grumpiness because of this, as I'd hate to see an adversary proceeding where I have to try to bring evidence of my debtor's financial situation into court as exhibits to argue against raising my schedule I income by further imaginary payments. But I assume that this forum can't much comment on that question because it could start to look like legal advice, so I can limit myself to questions (1) and (2) if need be!)

[justbroke]

Do not "encourage" the customer to hold the payment. Please know that you will be asked about your account receivables. Your account receivable became property of the Estate on the day you filed! It is now under the control of the (panel) Trustee.

1. I can fit an extra $2,000 into schedule C without any difficulty -- we're way under on exemptions. If I amend it to include the money, can I probably keep it? (I assume right now the account is the estate's so the trustee would keep any payments on it and turn me into an asset case.)

Yes, you would become an asset case. You could try to exempt the money.

2. Do I need to amend schedule B? (After all, I listed the account, and now some of it is about to turn to cash.) Or is that instead meant to be a snapshot of how things were at the moment we filed?

Did you even list your outstanding A/R balance on Schedule B???

(I fear trustee grumpiness because of this, as I'd hate to see an adversary proceeding where I have to try to bring evidence of my debtor's financial situation into court as exhibits to argue against raising my schedule I income by further imaginary payments. But I assume that this forum can't much comment on that question because it could start to look like legal advice, so I can limit myself to questions (1) and (2) if need be!)

There wouldn't be an AP over this. However, if you didn't properly account for your A/R balance, then you would need to amend Schedule B. Now, let me go to specifics. If you already have a line on Schedule B under "Account Receivable" and it reads "$70,000", then you don't need to do anything! You have already indicated your A/R balance.

The Trustee will most likely decide to become your Collection Agency and go after the A/R balance, by becoming an aggressive collector. Besides, they live for large chunks of money like that!

You will be an asset case, but that won't affect your discharge!

[mtbc]

Yes, I listed the outstanding balance on Schedule B under Accounts Receivable (it's actually my biggest "asset" even though I don't really expect to ever see most of the money!), I was just wondering if I need to amend it to be $2,000 lower if they do pay and my cash $2,000 higher. Or I don't need to cash the check, I can just bring it to the 341 and say "hey, see what I have for you" when they ask me if our financial circumstances changed.

[justbroke]

Yes, I listed the outstanding balance on Schedule B under Accounts Receivable (it's actually my biggest "asset" even though I don't really expect to ever see most of the money!), I was just wondering if I need to amend it to be $2,000 lower if they do pay and my cash $2,000 higher.

You absolutely do not amend it. Your schedules are a reflection of your Financial Status on the day your filed your petition (with, perhaps, the exception of Schedules I and J). So, if you had $70K in A/R on the date you filed, receiving $2K the next day, doesn't change the fact that you had $70K A/R on the day you filed. That alone will probably make your case an Asset case since the Trustee will probably want to give a shot at recovering money from your customers.

[mtbc]

Wonderful, thank you very much, that's what I had hoped. I'll be glad to hand that A/R over to the trustee as I know the customer is probably going to be dry as a stone anyway so I'm not really losing much -- it's not yet clear that they can even meet their salary obligations to their present employees, let alone extra payments to others.

[frogger]

As justbroke says, don't change anything. I probably would have that check in my pocket going into the 341 hearing so that I could give it to the trustee however.

[mtbc]

Okay, will do.