Stock Sales in year prior to filing Chapter 7 BR

[Zeke]

Howdy:

OK, so last fall, when I decided to move back to Michigan from California, I sold some stock. I should say, all my stock I had bought on an employee program from a former job....

I was broke, made the decision to move back near my family, and the only asset I had worth selling to finance the move and living expenses for the future was this stock.

It was worth less than $10,000, and has paid for moving costs, rent, heating fuel, electricity, and groceries for the past 8 months. I do not have another source of income, other than the sales of my belongings. I'm unemployed.

I have used portions of the money to make some payments to my creditors when possible.

I'm assuming this should not affect my bankruptcy as the proceeds have only served to sustain me while I've been unemployed and moving across the country.

I'm bringing it up because I saw a thread here regarding stocks and stock transfer and I don't fully understand the rules.

Can somebody verify this is no big deal? There's nothing for creditors to go after, it's all been spent.

Thanks!!

Zeke

[justbroke]

So long as you spent it on living expenses and other costs, there are no issues. The only issue would have been if you transferred the stock or the proceeds to an insider as a preference. A preference is where you treat one (unsecured) creditor better than other creditors. An insider preference is one where the creditor is a relative, friend or business associate. Insider preferences can be undone by the Trustee, after Motion and hearing, for transactions within a year of filing.

I don't see any issues unless it was a preference.

[despritfreya]

Selling an asset such as stock (in your case) for its fair value prior to filing is not a problem so long as one has kept detailed records of how the proceeds were spent. You should be fine.

Des.

[Zeke]

Some of the money I paid to my folks, as I'm living in their house (where I grew up) while they are in Florida for the winter. One of the checks arrived via forwarded mail, days after I had arrived in Michigan and did not have a bank account yet. It was deposited into my folks account as assurance that bills would be paid. It was paying in advance: rent, electric, internet, heating fuel ($2000), and that about covers the balance. I still have a little credit with my folks, and need to get the propane filled back up to 50% here in the next week (they are leaving FL today....) and then I'll owe them money!

So it was paid on living expenses. Just not by me to official credit accounts.

What kind of records do I need then? Just copies of bills and "receipts"

Zeke

[justbroke]

Zeke, you have a lot of actual and potential preference issues. I would seriously get 3-5 free consultations with Michigan bankruptcy attorneys and see if you can ask these questions. On the surface, it appears that you may have made preferential payments to your parents unless you can show, as Des wrote, receipts for how this money was spent.

[despritfreya]

Nothing is ever as easy as it seems.

By depositing your money into your parents’ account (as opposed to giving them a rent check and writing separate checks for utilities) you have inadvertently caused a problem. Your argument is that the account was nothing more than a conduit for the funds and your parents never had an ownership interest in them. Unfortunately, and depending upon how aggressive the Trustee is, the Trustee is going to assert that you have gifted the funds to your parents and is going to blackmail you into a “settlement”. It is in your best interest to consult with a local bk attny who understands the way the local trustees operate.

Des.

[Zeke]

When you say "account" though, what are you referring to?

I tried to cash the check at the local bank, and they wouldn't cash it without an account.

Dad was standing right there, so he consigned it and deposited it.

I did not sign over stock account, it had been liquidated.

So we are talking about money, money I've spent to live.

I have not started filing BR. In fact, if my a hole partner would get his house sold and repay me, I'd have the money needed to settle with creditors.

Why so many consultations? I'm committed to paying for one, and his fee, but paying for multiple consults? What's the point? Am I wrong thinking if the first one says I've screwed it up I should give up, or what?

Last thing I need on top of finance issues is legal problems.

Zeke

[Pjmax]

Most BK attorneys have free initial consults, but always ask when you make an appt. You want to consult with several attorneys before choosing one because it's not as simple as 'any BK attorney will do.' You have some potential issues that require an attorney that really knows what he's doing. You do not have a simple Chapter 7. I suggest you print out both posts you've made here, take them with you to your consults, and ask each attorney for their advice.

Even if you may not have to file right away or even in 6 mos., it's good planning to see an attorney right away and see if there are issues you can avoid. Timing can be everything when filing for BK, especially when you have some complicated issues.

[despritfreya]

Zeke,

We are not saying or even inferring that you did anything wrong. Some Trustees will use any excuse to find money. The proceeds of the stock sale were placed into someone else's account out of necessity. But, unfortunately, the necessity part really does not matter if there is a trustee drooling over the possibility of getting his/her hands on some $$. The Trustee is not your friend so you need to be aware of all issues that could possibly pop up (even, if, in the end, the issues are non-issues). Having an attny who has experience in dealing with the various trustees in your locale just makes good business sense (and filing bk is a business decision).

Most attnys have free consultations. Just like a doctor, you always get more than one opinion. And. . . giving that attny a copy of this tread so that he or she sees what others are concerned over is not a bad idea.

Des.

[Zeke]

Thanks Des.

I get it, I know you are trying to help!

I'm frustrated. Debt is in my name, but my former friend biz partner received it all...

I need to move on with my life here.

If he would just get his house sold I can still bargain out of all this, but I can't wait anymore for that to happen.

If there is any chance of family getting in trouble for these things I'm not filing period. So is there?

Thanks again.....

Zeke

[despritfreya]

If there is any chance of family getting in trouble for these things I'm not filing period. So is there?

Your family is not getting in trouble. In the non-bk world there is no issue with what you needed to do. In the bk world you are dealing with very specific "rules" which can create an issue between you and the trustee (or the family member & the trustee if you, when pressed, do not step up to the plate).

Typically, before a trustee will "go after" a family member, he/she will likely try to get a debtor to kick in a few bucks - so that the family member never becomes a target. This is the path of least resistance for a trustee since more times than not, the debtor does not want the family member involved.

Des.

[Zeke]

In this case, I'm hoping my legal counsel will tell me that accounting for what was spent is sufficient. I knew I would spend the money, I knew HOW I would spend the money.

I wasn't sure how my creditors would respond to my being unable to pay my bills any longer, and just wanted to be sure anything family-related was taken care of...

If it gets too messed up I'm willing to let them take my car vs having legal trouble, but this money was spent fair and square. Can't believe I broke a rule, seriously. Went from making a decent living to, I actually just lived the past 6 months on less than $1000 a month, for the first time since I graduated high school 26 years ago.

I now know there are "rules", but in the absence of ANY income at all, how they could claim I didn't spend it to live I don't know.....

Time to consult the pros....

Thanks again