Inheritance - How long? Payment of certain debts BEFORE chap. 7??

[ernburbs]

I have known for a while that I will need to file chapter 7. I had a medical condition with my kidneys that just racked up thousands worth of medical bills. I can't pay it. It's been about 4 years now. I live in Minnesota, and they sue (and arrest you if you don't show to court, despite never being served) if you don't pay. I've been able to avoid that so far, but I pretty much live in terror every day.

My grandfather passed this past September, and he left me a modest inheritance of about $6000.00. The estate will close in April. I am using this money (EVERY CENT) to pay off some of my student loans. My mother is also going to pay $10,000 towards them. She is co-signed on the loans she will be paying, and the money will never come through me. She is going to simply write the check to the bank without my involvement, as it is legally her debt as well. The reason I am choosing to pay off my loans with this money is because they are the most burdensome and troubling debt I have. They can never go away and have no consumer protections. My monthly payments are 50% of my income, and they are private, so they cannot be consolidated and the banks will not work with me.

Here are my questions:

1) How long do I need to wait to file after getting the inheritance and paying the student loans off? I know that trustees look at who was given "preferential treatment" in terms of debt. I've worked so hard to get rid of the private student loans... I moved home and lived in my parents basement. I would hate to screw this up.

2) Will my mom paying off loans that she is co-signed on hurt my BK case? Again, it is technically her debt too, and I will never even see or touch the money she sends the lender. It's not a gift to me. It's her money towards a joint debt.

I'm tired of this. For a while, I was suicidal. Now I'm just angry. I've considered fleeing the country (I have dual citizenship with Canada) but that's not the right thing to do. I'm sorry, but the private student loans are far more important than the medical bills. I have to pay those off. I'm only 33. I have a lot to contribute if I can just get back on the ground.

How do I handle this? How long do I wait to file chapter 7 after all is said and done? Can I? Is there any limitations on how far the trustee can look back? I'm tired of living in fear... Fear of being sued. Fear of being garnished. Fear of being arrested (I hate Minnesota so much... the luxuries afforded to debt collectors are disgusting... There is no due process here.) Help.

[AngelinaCat]

Hi ernburbs, welcome to the forum. I feel for you and your situation.

To try to start answering your question, the usual 'look back' period is six months prior to the date that you file. This is where you submit 6 months worth of bank statements, income tax returns, etc., to your attorney, if you use one for your case. I say 'usual' because a trustee can look back a year or more, if he/she senses that there was a chunk of money in your background. Based on that, I would say that you need to wait at least a year after our receive this inheritance, and put it to your student loans. Time, here, can be your friend, as the longer you wait to file, the less chance that the trustee will go sniffing. I also understand that time is your enemy because of your fear of suits, garnishment, etc.

Be sure that you keep every receipt and paperwork associated with this inheritance, inc case you are questioned about it.

I realize that this probably isn't something you want to hear. Hopefully a member who lives in Minnesota, will see this and chime in.

Besides the medical and student loans, what other debts, if any, do you have?

[keepmine]

You'll need to wait 90 days from filing to avoid a preference issue. SL's are not a priority debt. They just can't be discharged in bk.
Since your Mom is paying the SL's directly through her bank account and she's legally obligated to pay them I don't see any issue that could affect your bk.

Have you asked your lawyer these questions?

[ernburbs]

Have you asked your lawyer these questions?

No lawyer yet. I can't file, and I dont want to spend the money to consult if I can avoid it.

[ValleYum]

Why not consider filing using the Federal Bankruptcy exemptions - you can exempt cash (money in a savings account) using the Wildcard for the unused portion of homestead - THEN pay the student loan off with the $$ from your inheritance after your BK is discharged?

An individual filer has two possible wild cards if using Federal Bankruptcy exemptions: Up to $10,825 of unused homestead exemption amount, for any property and $1,150 for any property. That is Almost $12k of property you can cover if you use these.

[LadyInTheRed]

Most BK attorneys give free initial consultations. You should consult with several attorneys before you decide on one. It's never to early to start.

[LadyInTheRed]

Why not consider filing using the Federal Bankruptcy exemptions - you can exempt cash (money in a savings account) using the Wildcard for the unused portion of homestead - THEN pay the student loan off with the $$ from your inheritance after your BK is discharged?

An individual filer has two possible wild cards if using Federal Bankruptcy exemptions: Up to $10,825 of unused homestead exemption amount, for any property and $1,150 for any property. That is Almost $12k of property you can cover if you use these.

Exempting the cash and paying off the student loan after BK will take care of one issue. But, I belive the $6,000 inheritance will be included as income in the six month look back. Depending on ernburbs' other income, the $6,000 may make a difference in passing the means test.

[ernburbs]

Thank you for all of the suggestions. I'm incredibly stressed out by this. I've basically done everything wrong that you could do if you are considering filing:
1) I hand over my checks to my parents, who have been making the student loan payments out of their accounts. They are co-signed on most of the loans. I have a checking account, but I'm afraid to use it out of fear of it being drained if I get a judgement against me. In MN, they can get a default very easily. So, this looks like I am paying off family members. Strike #1.
2) I've been hitting the student loans HARD. The reason for this is because the minimum payments were unbearable. It was either bite the bullet and pay them off, or face a lifetime of h#ll with no way out. I moved home and started giving them everything. So, this looks like preferential treatment of creditors. Strike #2.
3) I've been driving around a car that belongs to my dad for the past 4 years. It was originally loaned to me as a means of getting to and from college. I just kind of took the payment over. I finally handed over $1800.00 to pay the thing off. We never considered transferring the title, because my dad had a 0% APR and we didn't want to lose it. Strike # 3 - It looks like I am hiding assets.
4) The inheritance. I don't want to deposit it into my checking in the event that I get sued. I was just going to sign the check over to my mom (it's only going to be around $6000.00) and let her handle the payment of the student loans. Strike # 4 Getting an inheritance and giving money to a family members.
I've done everything WRONG that one can possibly do. I really don't know how to make this right. I know that I want to be on the up and up with everything, but my first priority is paying off the private student loans. They are the most dangerous debt I have. Not paying them off is not an option. The other types of debt I have are some piddly credit cards, and lots of emergency room bills and copays and stuff. It's been sold so many times that it's hard for me to trac who even has it anymore. I have a huge pile of statements. How does a lawyer even go through such a mess. I've created my own debt matrix, but it's loaded with duplicates. The bulk of the stuff isn't even on my credit report.

How do I make this right? It sounds like the trustees can go back YEARS from what I've read on the internet. Even if I start doing everything correctly (untangle my finances from my parents and just wait two years) it feels like I can't win. The debts have about 2 years left on the SOL. Do I just ride it out and protect my assets the best i can by not using my checking account and cashing my paychecks/using prepaid debit cards and money orders? This is humiliating. I can't believe that I am in this situation. I feel pushed up against the wall. I feel like I need a good timeline and action plan.

[mountanddo]

Only advice I can give you is that you don't go to the attorney I went to. I have a very simple chapter 13 so it didn't really matter but they weren't very helpful at the initial consultation. They are a pretty big law firm. If you'd like to know who PM me and I'll tell you. Maybe a smaller firm might be better. You can go on a few free consultations and I recommend you do.

[ValleYum]

Exempting the cash and paying off the student loan after BK will take care of one issue. But, I belive the $6,000 inheritance will be included as income in the six month look back. Depending on ernburbs' other income, the $6,000 may make a difference in passing the means test.

Very true, LITR.

Median income for 1 person in Minnesota is $46,161/yr or $3846/mo.

What do your income and expenses look like ernburbs? Do you have medical insurance now?

[keepsmiling]

Every month you hand over your paycheck. Might one consider that rent, contribution for food and utilities, etc?
You will need to show some expenses. What your folks do with the rest of that money, such as pay for their co signed debt, is up to them.

Before y'all chew me out, I am not suggesting fraud by any means, but perhaps a different way of viewing the same situation. Or at least the beginnings of one.

Some folks here have just let their wages be garnished, more or less permanently, since it cost less in the end than a 13.

And... at least you have the option of leaving the country.

[SMinGA2]

I'm with Keepsmiling on this one. What you're doing is NOT the same as giving money directly to family. You do have expenses, even though you're living at home its not like the courts expect your parents to cover everything out of their own pocket.

I do not know anything about Minnesota law - but here if you get a judgment against you, its just a matter of days before you start getting notices from bottom-dweller lawyers wanting to help you file bankruptcy. They watch the public records, I imagine. The GA bottom-dwellers probably have cousins local to you, who do the same thing. What I'm getting at: if a judgment happens you'll probably find out about it. And levying a bank account does not happen overnight. While you still should probably not leave $ in the bank, you should be ok to cash your check at your own bank and then use the funds to pay your own expenses directly going forward.

[ernburbs]

Wow, everyone. Thank you for the great suggestions. I neglected to mention that I moved home for two years, and just 7 days ago rented my own tiny little studio again. That's actually a good thing... The means test would have taken my parents income into consideration, which I find ridiculous. So, now at least I am on my own, making the income stuff much simpler. I live VERY simply.

My income is 42,000 yr and I do have health insurance. I actually DID have health insurance when all of this happened, but I didn't know the policy I had purchased was useless. Pre-existing condition clause. They covered NOTHING. What was worse was that they paid it, but later took the money BACK after several months from my medical providers. I now have a good medical plan and FSA through my employer.The SOL on these debts runs out in two years... After that, well... It is what it is. At least if they try to sue me then (which we know they will, because they regularly break the law. It's like the wild west...) I have some recourse. I calculated what a garnishment would cost me, and it would hurt, but I would just have to make some lifestyle changes... It wouldn't end me. I feel like I should ride this out for two years. In the meantime, I can untangle my finances from my parents, get everything squared away with my student lenders, and then just see where it lands. If I have to file, because I'm being harassed non-stop, I'll be in a good place to do it. Thoughts?

[keepsmiling]

Sounds like a plan is beginning to form.
Why not consult a few attorneys regardless?
And remember you can always go buy a new car to knock your dmi down.

[keepsmiling]

Sucks about your health insurance. I could rant a lot on that but I don't want to bore you to death. I'm on this board mostly thanks to the cost of it when one is self employed. Insane.