Need Help spending $$ before I file

[gohornsgo]

Sounds kinda odd to have a "too much money' issue prior to filing chapter 7. I am filing in one month in the state of Arizona. I am going to receive about $7000 for my tax refund which is twice what my CPA said to expect. I also received $1500 in an unexpected refund from an attorney on funds that I spent in 2007.

It boils down to this....I have about $8000 to spend in a month. I can spend $1500 on dental, $500 on car maintenance, $2000 on groceries, $200 on a gas card. $500 on tools of my trade, $800 on bills. All of these are legit expenses per my attorney. I am still needing to spend about $2500 more because in AZ a single guy can have no more than $150 in a checking account at time of filing.

Any suggestions?

[BrokeOR]

Yes. Stick the rest in a 401(k) plan, if you have one, or open an IRA. Check with your attorney, but my attorney advised me to do exactly that based on the law.

Another alternative is to prepay rent. Ask your attorney, but it's another thing my attorney advised.

[BrokeOR]

One more obvious thing-have you paid all your attorneys fees? Do so with the money, if you haven't.

[momofthree]

What about a year's worth of car insurance?

[gohornsgo]

Thanks everyone for your input!

[nozar]

Bumping this old topic because it's still actual, I'm facing the same problem, and I have new answers to it.

Yes. Stick the rest in a 401(k) plan, if you have one, or open an IRA. Check with your attorney, but my attorney advised me to do exactly that based on the law.

You can't retroactively contribute to a 401(k), but you can open an IRA, and if it's before the tax deadline (which this year has been extended to July 15 due to Covid-19), you can contribute TWO year's maximum. Beware that while this pre-BK planning is legal, it might be perceived as trying to hinder creditors (Drescher Law).

Another alternative is to prepay rent. Ask your attorney, but it's another thing my attorney advised.

According to this old thread, most landlords won't accept prepaid rent, because you could become a nuisance and they won't be able to evict you.
However, nowadays in 2020, you can book Airbnbs back-to-back and there's no problem with that (as far as the hosts are concerned).

However, how much can you prepay for Airbnbs? Won't the trustee have any issues if you put yourself up in a penthouse in downtown for a year?

Other things that might be OK to pre-pay - can anyone confirm?

• health insurance
• utilities
• groceries, as much as you have storage space
• grocery coupons - is this an option? Theoretically they should be considered a living expense.

However, what are the legal, or reasonable limits for these expenses?

[flashoflight]

You have to avoid Bankruptcy Code §727(a)(2)(A):

(a)The court shall grant the debtor a discharge, unless—
(2)the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed—
(A)
property of the debtor, within one year before the date of the filing of the petition; or

Prepay of anything sounds like you are trying to hinder and delay by removing cash. I read a case a while back where someone tried to prepay the mortgage monthly payments and it was determined to be a §727(a)(2)(A) violation and the discharge was denied. If you don't have a history of contributing to IRA/401k/etc. prior to tax year 2019, it sounds sketchy.

But replacing necessary broken stuff earlier rather than later is legit. If you were a homeowner, this may be easier since you can fix/replace stuff that is needed for the necessary support of yourself and your dependents like a washer or furnace. Groceries up to maybe $1k doesn't sound as sketchy. Is there any dental or medical surgery, especially deferred bodily maintenance that needs to be done? Is there something to be fixed in your current car (eg. timing belt replacement, new tires, etc) or do you need to replace your car with a newer one without exceeding the bankruptcy exemption. Can you buy tools for your specific profession? Do you need a replacement smartphone? Do you need a replacement computer/laptop? I would rather you replace something a bit earlier than put it in an IRA if you don't have previous history of contributing similar amounts.

[womanonfire]

If you don't have a history of contributing to IRA/401k/etc. prior to tax year 2019, it sounds sketchy.

But replacing necessary broken stuff earlier rather than later is legit. If you were a homeowner, this may be easier since you can fix/replace stuff that is needed for the necessary support of yourself and your dependents like a washer or furnace. Groceries up to maybe $1k doesn't sound as sketchy. Is there any dental or medical surgery, especially deferred bodily maintenance that needs to be done? Is there something to be fixed in your current car (eg. timing belt replacement, new tires, etc) or do you need to replace your car with a newer one without exceeding the bankruptcy exemption. Can you buy tools for your specific profession? Do you need a replacement smartphone? Do you need a replacement computer/laptop? I would rather you replace something a bit earlier than put it in an IRA if you don't have previous history of contributing similar amounts.

Smartphone? In GA, there is a $300 per item value limit so that may not work. As for IRA, we're in that boat; no IRAs but looking to fully fund both for 2020 and 2021 with an inheritance and put as much distance as we can between us and filing a Chapter 13. My argument is without an IRA in retirement, based on our current projected income from social security, we may just end up back in bankruptcy in our golden years. We are in our 50s.

Is this spending down a case of "better to ask for forgiveness than permission", because the worse case scenario is that you would have to pay it to creditors, which is kinda where most people are in the first place. It's not ideal but it seems like to me, it's worth the gamble.

[dontlook]

That is a rare problem, but it could make sense to pay utilities ahead.