Question Stock and/or crypto gains allowed?

[AndHereWeAre]

Hi,

We are almost 17 months into our C13.

When we began, our attorney advised us if we inherited anything or won the lottery and the like, that would have to be reported to the trustee and he might take all or some of it.

At the time, we also provided all the info on our stock and crypto investments and he let us keep them, small that they were.

Question - if it later turns out that some of those stocks and/or crypto coins increase dramatically in value such that we want to start taking some profits from them, is that something that 1. will need to be reported to the trustee and 2. if so, is he going to just want to take it all?

Thanks!

[justbroke]

Question - if it later turns out that some of those stocks and/or crypto coins increase dramatically in value such that we want to start taking some profits from them, is that something that 1. will need to be reported to the trustee and 2. if so, is he going to just want to take it all?

The increase in value of property, whether it's a house, car, stocks, bonds or crypto, are not part of the bankruptcy estate in a Chapter 13. In fact most Chapter 13 plans include a provision that all property reverts back to the debtor at the time of confirmation.

Anything new, however, is property of the bankruptcy estate (the Chapter 13). So winning the lottery or an inheritance would be brought into the bankruptcy estate subject to any exemptions which could be applied.

Now, taking profits from stocks, crypto, or other appreciating property and covering that profit into cash may be an area of difficulty. As soon as you convert the property to cash the question becomes whether that is now disposable income subject to distribution by the Trustee. In some cases the conversion of those items, stocks, crypto, property, may be considered a sale. Technically you are prohibited from selling any property without permission from the Chapter 13 Trustee.

The sale of any property is too specific and you may need to look to your confirmed plan and/or your attorney for the right answer for your district and plan. If you have a specific emergency and need to sell stock or take a 401(k0 loan you should also discuss with your attorney to determine if Trustee permission is necessary to cover a true emergency.

[AndHereWeAre]

Thanks for your answer and sincere apologies for my very tardy reply...

We have a good plan but things are still tight so we want to have irons in the fire to try and earn money rather just relying solely on my salary since you never know about companies, especially with older workers...

Now, taking profits from stocks, crypto, or other appreciating property and covering that profit into cash may be an area of difficulty. As soon as you convert the property to cash the question becomes whether that is now disposable income subject to distribution by the Trustee.

We scrimp and save where we can to also buy small amounts of stocks/crypto where possible and reasonable, but sounds like if we sell any of those while in C13 they could be considered disposable income... :-(

[flashoflight]

The increase in value of property, whether it's a house, car, stocks, bonds or crypto, are not part of the bankruptcy estate in a Chapter 13. In fact most Chapter 13 plans include a provision that all property reverts back to the debtor at the time of confirmation.

In California, many trustees change that provision that property reverts back to the debtor at the end of the case (eg. dismissal or discharge). Definitely check the verbiage of the confirmed plan carefully Selling a homestead in California and not reinvesting the funds in another home within six months (a very short amount of time nowadays) will revert the unspent funds back to the BK estate. If you sell crypto and the trustee finds out about it via your IRS disclosure (cough cough) of the sale of crypto, the conversion to cash is enough to make it property of the BK estate. You could take a loss and the remaining amount is still going to the trustee. So if your small crypto stash goes from $100 to $100,000, don't sell it. Figure out a way to hedge it so you don't sell it. If you're going to buy crypto, I'd use one of the few crypto ETFs from a IRA/Roth retirement account.

[AndHereWeAre]

Thanks for the (good) advice. We are not in CA but all the states are trying to find ways to get crypto gains... :-(