What if you have some cash?

[Ineedhelp2]

I am going to take a second on my house to get some cash for living expenses and to get my business going again. I might have about $15,000 at the time of filing, but this would not be "excess" money, but would be money I would need for expenses over the next few months while getting my income going again. Will they want to take this money?


Also, I am a sole proprietor of a business, and my practice for years has been to get up-front deposits for work I later perform, and then bill for the balance. I use the up-front money to help cover my expenses, including personal expenses. However, because of an illness in the family, it put a halt to my business and the up-front money got absorbed before I could do the work. I probably owe about $25,000 in work to customers. Since this was from a couple years ago, some no longer want me to do the work, and want a refund. I've been in business a long time and want to do right by people who trusted me with advance payments, by either completing the work, or refunding money to those no longer desiring my services. But meanwhile, can these advance deposits be included as debt to be discharged? (For the most part, customers are not coming after me. Ony a couple, and it is for only about $1,500. The deposits average about $400, and this is a small amount of money for the large corporations I deal with, and would think that it's not worth their trouble to pursue it).

[bkadv]

When you file, make sure you do not have much disposable cash on hand. I think we were allowed 400.00 in our checking account. (ch7)

[Danielle1981]

Trustee will be all over taking that money. I wouldn't file until everything you intend to pay with that is paid. Or take the money out after the bankruptcy discharges and closes.

[lrprn]

I am going to take a second on my house to get some cash for living expenses and to get my business going again. I might have about $15,000 at the time of filing, but this would not be "excess" money, but would be money I would need for expenses over the next few months while getting my income going again. Will they want to take this money?

INH2, you can bet the ballpark your trustee will take your $15K and distribute it to your creditors if it's in a checking or savings account when you file. Mixing business expenses with personal expenses like you have can be a real red flag to a trustee when filing Ch 7. We've had several members share on other threads that they were asked to go back years to pull business and personal receipts, tax forms, etc. for the trustee to prove they didn't commit fraud when they filed.

Also, I am a sole proprietor of a business, and my practice for years has been to get up-front deposits for work I later perform, and then bill for the balance. I use the up-front money to help cover my expenses, including personal expenses. However, because of an illness in the family, it put a halt to my business and the up-front money got absorbed before I could do the work. I probably owe about $25,000 in work to customers. Since this was from a couple years ago, some no longer want me to do the work, and want a refund. I've been in business a long time and want to do right by people who trusted me with advance payments, by either completing the work, or refunding money to those no longer desiring my services. But meanwhile, can these advance deposits be included as debt to be discharged? (For the most part, customers are not coming after me. Ony a couple, and it is for only about $1,500. The deposits average about $400, and this is a small amount of money for the large corporations I deal with, and would think that it's not worth their trouble to pursue it).

After you file and are discharged, it's your right to pay back whoever you wish, even if the debts were discharged through bk. Just be sure to list all the creditors you owe the $25K to when you file. You never know who might own those debts later down the road or who may decide that you are worth suing after a few years pass. If you leave certain creditors off your creditor list, then there's no protection from the automatic stay for those debts plus you legally still owe the debts even after discharge.

[Ineedhelp2]

I don't get it.

People who are self-employed or who work on commission might get large payments one month and nothing for the next couple months.

A realtor might have just gotten a $10,000 commission and might not get any more money for a couple more months and this will be for living expenses. How can this type of money be protected?

[FilingOnMyOwn]

Are you saying you have 15k in cash but only 25k in debts?

[Ineedhelp2]

No.

I have more than twice that in debts.

And the cash I would have would be from a refinance and would be for living expenses while I get back on my feet. I'm self-employed. If they took my $15k away, I would have nothing to work with and no money for anything.

[FilingOnMyOwn]

Thats how it works. BK is a last resort, not a convenience tool. By the time I filed bk, I had put almost every last dollar towards my debts. I had only $300 left to my name, and spent $209 to file. Having only $91 left is something to worry about.... Not having only $15k.

You won't be able to keep any cash over the exemptable allowance for your state, and if you do and you hide it, you risk big trouble. You may have to do a chapter 13 if you're determined to file.

[Jman30]

There is no way the Trustee will let you keep that money. The whole point of is that they take ALL your disposable income. When I filed, I had $400 in my checking account and we had a court order to freeze our assets because a lawsuit from a landlord. The BK stopped the seizure, but we had to pay $350 to file. The lawyer was nice enough to let me forward date the check until my next payday.

[FoolAndHisMoney]

Ineed, everyone's very right here. You're supposed to be broke. Doesn't matter where the money came from. Once it goes from being exempt as it probably is now to being non exempt the trustee will take it. I don't think any state has a 15k cash exemption. If you take the 15k advance then you should hold off filing for a while until you get the balance down to your allowed exemption and it's important that you keep records of where the money went. There's also no benefit if you use this money to pay unsecured creditors unless you made recent charges and need to show good faith. Only a chapter 13 will allow you to keep this as long as you pay back at least 15k over your plan.

[Ineedhelp2]

Is a person who files for bk allowed to have a job and make money at his job?

Not everybody gets paid weekly. A commission sales person could make a large chunk of money one month and then nothing for several months.

A realtor could have been struggling along and working for several months and suddenly makes a sale and makes $15,000. This is not a windfall. This is a payment for months of work and might need to last for three or four more months until the next commission.

There must be some kind of provision for this.

In my situation, I am self employed and am not doing much business at the moment, taking care of a spouse who is ill. We will need money to live on while I get my business rolling and I need some of that money for business expenses.

[keepmine]

Well, if you don't believe us, talk with a lawyer.
There are many post here where we suggest that people hold off filing until outstanding checks clear and there is a nominal amount in the bank.

[FoolAndHisMoney]

If you get paid commission today of 15k and don't see another commission check for a few months then use the cash on hand for living expenses and file when it's at least down to your allowed exemption. You may have to ask an attorney if there are any provisions for what you described. Filing bankruptcy is generally a snapshot of your financial condition the day you filed. If you came into some money after filing it's usually not part of the estate unless it's an inheritance or law suit settlement. You also can't take out any loans while in bankruptcy without the courts permission.
Most of us here are either working for the man, unemployed and the posters that were self employed were very broke. Your question is the first to be brought up which is why you need professional help. Let us know. Good luck.

[lrprn]

Is a person who files for bk allowed to have a job and make money at his job?

Not everybody gets paid weekly. A commission sales person could make a large chunk of money one month and then nothing for several months.

A realtor could have been struggling along and working for several months and suddenly makes a sale and makes $15,000. This is not a windfall. This is a payment for months of work and might need to last for three or four more months until the next commission.

There must be some kind of provision for this.

In my situation, I am self employed and am not doing much business at the moment, taking care of a spouse who is ill. We will need money to live on while I get my business rolling and I need some of that money for business expenses.

You've hit upon one of the major reasons the new bk law is so disliked by bankruptcy courts, judges, and bk lawyers. As you've said, it's much harder to be fair to debtors who don't have a consistent, regular income when calculating the prior six months of income. If a debtor lives on commissions, contract sales, owns their business, etc. their income likely isn't regular. It makes calculating that six prior months of income fairly very difficult. If you make more money than normal in those six months, your income looks higher than it actually is, and if you are in a lull period, your income looks lower than it actually is. You are right - this is a major weakness in the new law, but unfortunately it's the law and we are stuck with it.

The way others here who have been self-employed have overcome this have been to plan when they filed so that their irregular income was equal or a just little lower than what they anticipated they would average over the year. This assumes you aren't filing in an emergency. If you do need to file quickly, then you have to go with what you have.

When you own a business and file personal bk, at least six months beforehand (and much longer if you can manage it) you MUST completely separate your business money from your personal money. Money from and for the business stays in the business accounts, and your personal money stays in your personal accounts. When you are self-employed, you 'pay' yourself from the business accounts by check and deposit that payment in your personal accounts. That is how to file bk and be self-employed. The trustee wants to see the separation clearly between personal and business income and expenses to ensure there is no fraud.

Bk cases that mix a self-owned business with personal bankruptcy are looked at with a fine-tooth comb by trustees and judges because there is a higher potential for overlooked or under-valued assets or fraud. Everything must be absolutely above-board.

I wish there was a better answer for you, INH2. This is the reality of today's bankruptcy system, and the best reason I can think of for having a really good bk lawyer to help you sort out what's best for you and your business when bk is being considered.

[Ineedhelp2]

Thanks for all the responses.

I found out that Oregon allows $7,500 in a bank account, so that solves half the problem.

Yes, I agree that I will need help from a lawer for this and a lot of other concerns.