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Timing the filing date with paycheck

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  • Timing the filing date with paycheck

    OK, so I get paid once a month, and as an independent contractor. Filing in Texas. I have read the Texas exemptions, and wages earned but not yet paid are exempt in Texas. But not for independent contractors. So I've got to time my filing for AFTER my check cashes. I have a few questions...

    1. Since I get paid once a month, am I expected to make it 30 days on what cash I'm allowed to have at filing? In Texas I cannot find an amount for cash on hand. Does it just defer to the Federal amount?

    2. I've read that the "mother of all Walmart trips" is acceptable prior to filing. Do you think a trustee would allow pre-payment for the month of other expenses? For example money paid in advance for all upcoming utilities, insurance, fall school clothing, upcoming license fees for work... necessary imminent expenses but not with an actual invoice in hand yet?

    3. If I file September 15th, and I'm an independent contractor- if I work Sep 1st- 14th, will those unpaid earnings automatically become part of the estate, or are you allowed to pay necessary bills (cars, mortgage, utilities) using such funds when received?


  • #2
    I can't really answer 1 and 3... but as for 2, YES, I did a lot of shopping for necessary expenses to unload cash from my bank accounts.
    I did a Costco shop for reasonable and necessary household items--toilet paper, paper towels, health items (vitamins, hearing aid batteries, etc.).
    I filled all my prescriptions for 90 days instead of the usual 30.
    I renewed any work certifications I needed for my job.
    I paid off utility bills as soon as I received them rather than waiting until the due date 2-3 weeks later.
    I paid off the remaining 3 months on my car insurance instead of just the regular monthly payment.
    I put my income tax refund into an IRA (you can contribute up to $5500 to an IRA in this case).
    Another option that I didn't do but was allowable was to take out a term life insurance policy.

    I saved receipts/confirmation of payment on ALL of this in case there were any questions.

    Basically what they DON'T want you doing is going out and blowing your available cash on luxury items (computer, big screen TV, etc.) as those would be considered assets.

    Everything worked out fine and I went from having almost $4000 in the bank in early March to having literally $200 in my checking account and $200 in savings the day I filed in late March. My exemptions all went towards my car, a couple small savings bonds, and my life insurance policy cash value, so we had to get those bank accounts down as low as possible. It was a race, but as soon as those accounts were low enough, the attorney filed the Ch 7 paperwork, which was literally the day before I got my next paycheck.

    Comment


    • #3
      Originally posted by ChaptainHook View Post
      I cannot find an amount for cash on hand. Does it just defer to the Federal amount?
      No. You must choose either Texas exemptions or Federal exemptions.
      LadyInTheRed is in the black!
      Filed Chap 13 April 2010. Discharged May 2015.
      $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

      Comment


      • #4
        Originally posted by ChaptainHook View Post
        1. Since I get paid once a month, am I expected to make it 30 days on what cash I'm allowed to have at filing? In Texas I cannot find an amount for cash on hand. Does it just defer to the Federal amount?
        You would normally exempt any cash. There are various ways to exempt wages (not all of it but in most States, most of it). For example, Texas has an "earned but unpaid wages" exemption for "personal services." Otherwise you may be able to cover it all under the Federal Wildcard. This is why you'll need to work the numbers both ways to determine which exemption scheme is better for you.

        Originally posted by ChaptainHook View Post
        2. I've read that the "mother of all Walmart trips" is acceptable prior to filing. Do you think a trustee would allow pre-payment for the month of other expenses? For example money paid in advance for all upcoming utilities, insurance, fall school clothing, upcoming license fees for work... necessary imminent expenses but not with an actual invoice in hand yet?
        Receipts are always a good thing to show exactly where you spent the money.

        Originally posted by ChaptainHook View Post
        3. If I file September 15th, and I'm an independent contractor- if I work Sep 1st- 14th, will those unpaid earnings automatically become part of the estate, or are you allowed to pay necessary bills (cars, mortgage, utilities) using such funds when received?
        You need to find an exemption. I looked at Texas and there is an "earned but unpaid" wage exemption. You would have to qualify to use that exemption and actually apply it to "earned but unpaid" wages (it's not "automatic"). I don't personally know what classifies as "personal services" in the Texas law.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment


        • #5
          Thanks for the answers. There is no question I'm using the Texas exemptions, due to home equity. So I will go back to the chalkboard and try and figure out how to live for 30 days on couch cushion cash. The way I see it, ideally here in Texas you file the day before your check, since wages earned but unpaid are exempt. Being a 1099-misc guy however, it seems that won't apply to me.

          Enter lawyer.

          Comment


          • #6
            If you're getting those free consultations, ask whether the "unpaid commission" exemption applies.
            Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
            Status: (Auto) Discharged and Closed! 5/10
            Visit My BKForum Blog: justbroke's Blog


            I am not an attorney. Any advice provided is not legal advice.

            Comment


            • #7
              As a follow up, I found out about 1099 wage earners in Texas.

              75% of your unpaid earnings are exempt.

              Cheers

              Comment


              • #8
                Excellent job confirming the unpaid earnings exemption.
                Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                Status: (Auto) Discharged and Closed! 5/10
                Visit My BKForum Blog: justbroke's Blog


                I am not an attorney. Any advice provided is not legal advice.

                Comment


                • #9
                  Ok.. lawyer wanted to meet today. Went in and he said he dug through Texas code and discovered my unpaid Texas commissions were 100% exempt because they are under $25,000. So the 75/25 exemption applies to over $25,000. Just in case anyone is reading this from Texas in a similar future circumstance.

                  Therefore, the timing was right and we went ahead and filed for Chapter 7 today, rather than after my check. With regard to current $$$ in account, using Texas exemptions, Lawyer said the trustee will not go after just a few hundred dollars in your account. It's not worth it. Technically any cash is non-exempt, but it's just not done. He said if you were an asset case, they would add the few hundred in your account when you filed to the other asset(s), but in a no -asset case it's a non issue.

                  Thanks to JustBroke for all the help on these boards understanding this process. It is wonderful to understand what you're going through and what to expect.

                  We will avoid the means test due to CMI. However, Lawyer said he expects a UST discovery request. I guess just the flavor of my case. So we will see what happens. I have a DMI that is very negative using actual expenses, and still negative using IRS allowed expenses. But who knows, it's out of our hands. The burden of proof is on the UST for any objection, so if the math works out and there was no fraud, I guess we go in hoping for the best.

                  I will be attempting to avoid a UCC-1 lien that attaches only to exempt personal property through an additional motion. That is an extra cost FYI, as are all proceedings during your case. No surprise.

                  We enter BK 3 months in arrears on the mortgage. He advises we should not check on the petition that we are surrendering our home, as he wants to use the actual PITI on our schedules. Apparently you cannot include that if you check an intent to surrender. This is different than a reaffirmation of your mortgage, which I told him "no thanks" to. We have equity in the home. My hope is we can float by a few more months in this chapter 7, and perhaps deal with the mortgage company post-discharge. To be determined.

                  Regardless, we filed and it feels good to be past that line in the sand. He wasn't concerned about our debt schedule, our home asset inventory, or any details today. Just suggested we should file due to the low checking account balance and imminent payday. All the details can be filed within 14 days.

                  So here we go! Thanks to this forum again. I will share what happens with my case as it unfolds.

                  Comment


                  • #10
                    Best wishes, CH. Congrats on getting it done. I hope everything goes smoothly for you!

                    Comment

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