Cash in bank accounts

[lrprn]

One thing - when you use the terminology "take" - as in - the trustee will want to take the money - does that really mean they'll just include it in your total number, or they take your cash!?

If you file Ch 13 and have more cash showing in your accounts than your state's bk exemptions can protect, then your trustee can take whatever cash is not protected. Yes, take as is remove the unprotected cash from the bank to distribute equally among your creditors that file claims equally along with taking a % for him/herself as well.

SO8 is 100% right. Pay your bills ahead or use money orders to pay creditors so you control your cash flow and deposits so that whatever is in the bank in all your accounts on filing day is completely protected by your exemptions. Your lawyer can tell you what total cash amount can be protected. Then it's up to you to make it happen so you don't lose anything when you file.

[nsupanda]

" ... It takes anywhere from 4-8 days for things to clear out of my account and by the time things clear, another paycheck is direct-deposited into my account. .... what should I do in my situation???"

Stop using your account a couple of weeks prior to filing. Keep the deposits coming but take cash or money orders to make payments for your living expenses so your balance accurately reflects the actual amount of cash you have in your account.

The TT does not care if the funds are already allocated to other expenses and have not cleared yet. The BALANCE of your bank accounts and cash on hand is what you have to declare in your petition on the filing date. So if your balance is showing more funds because the check has not cleared yet, the TT is still entitled to those funds. Don't take a chance that the check will clear before the filing date.

Don't worry. You don't have to do this for long. Once your petition is filed you can go back to your normal method of paying by check.

Thank you so much for that advice, it makes sense to me now. Why does this have to be so difficult. That's just one more thing I have to make sure I do!!!

[StartingOver08]

Pay your expenses with cash or money order just before the filing date.

" ... It takes anywhere from 4-8 days for things to clear out of my account and by the time things clear, another paycheck is direct-deposited into my account. .... what should I do in my situation???"

Stop using your account a couple of weeks prior to filing. Keep the deposits coming but take cash or money orders to make payments for your living expenses so your balance accurately reflects the actual amount of cash you have in your account.

The TT does not care if the funds are already allocated to other expenses and have not cleared yet. The BALANCE of your bank accounts and cash on hand is what you have to declare in your petition on the filing date. So if your balance is showing more funds because the check has not cleared yet, the TT is still entitled to those funds. Don't take a chance that the check will clear before the filing date.

Don't worry. You don't have to do this for long. Once your petition is filed you can go back to your normal method of paying by check.

[rcoveles]

I always have income coming in, via my business, wife's weekly check, and my side weekend work. This is going to take some planning I guess?

One thing - when you use the terminology "take" - as in - the trustee will want to take the money - does that really mean they'll just include it in your total number, or they take your cash!?

[nsupanda]

I've read here that you should keep very little cash in your bank accounts on the date you file. I've also read varying strategies about stocking up on groceries, non-perishables etc.

I was wondering this same thing... our household receives weekly income (my husband and I both get paid every other week, I get paid one week, and he gets paid the other week). Therefore, our balance every Friday is about $1000. I pay the bills on Sunday so my balance on Monday will be anywhere from $0 - $200... but that's only in my check book register. It takes anywhere from 4-8 days for things to clear out of my account and by the time things clear, another paycheck is direct-deposited into my account. I mean, if you looked at my daily balances you'd think I were well-off... but I'm not at all... what should I do in my situation???

[olivies]

I'm close to filing but just got back 10k from tax returns. Attorney has listed it as cash in a bank account. Can I do something with that before filing? Won't the trustee look back to see what i've spent my money on in the past few months?

Adjust your withholdings. Some trustees will stake claim to your tax refund, and it could raise suspicions as a way to "hide" disposable income. And even if not, why give the gov't an interest free loan using your money?

[MSbklawyer]

Not all districts take the "liberal" approach to exemption planning. . .

As though people don't already have enough of a misperception of the South as a rural backwater where people don't have indoor plumbing and everybody wears overalls all the time, the Fifth Circuit Court of Appeals (Louisiana, Mississippi and Texas) officially adopted the "Pigs vs Hogs" approach to pre-bankruptcy exemption planning. Pigs, you see, get fat. Hogs on the other hand, get slaughtered. So if you act like a pig in your exemption planning, that's fine. But don't act like a hog lest you be slaughtered:

There is little legislative or judicial guidance on how to determine what actions fall within "intent" either to "hinder" or to "delay," especially concerning the conversion of non-exempt to exempt assets on the eve of bankruptcy. . .One approach that appears appropriate in this instance is the "pig to hog" analysis: "when a pig becomes a hog it is slaughtered." This analysis recognizes that while some pre-bankruptcy planning is appropriate, the wholesale expenditure of non-exempt assets on the eve of bankruptcy, including conversion to exempt assets (especially where there are liberal state law exemptions), may not be.

In Re Bowyer, 916 F.2d 1056

That clears things up nicely, doesn't it?

[HHM]

bigstick
Ask your attorney about your ability fund your 2009 Roth IRA to the $5k/yr max, and fund your 2010 Roth IRA to the $5k/yr max. If your state exempts IRAs then you can do that and keep it through bankruptcy. If you withdraw it before 5 years there's a 10% penalty so you'd deposit $10k and get $9k out, but you wouldn't have to spend it all.
You can fund 2009's Roth IRA up until April 15, 2010. If your married you can fund your and your spouse's 2009 and 2010 Roth IRA allowing you to sock away $20k before filing BK and withdrawing $18k after you file. Legally you could withdraw it the day after you file BK but the trustee will already be upset about you doing something completely legal so withdrawing it immediately is just a slap in the face. I recommend my clients do this and withdraw it after they receive the discharge unless they need it sooner.

--William

Not all districts take the "liberal" approach to exemption planning. The analysis still looks for the "badges" of fraud, that is, did you move the assets with the intent to hinder, delay, or defraud your creditors. As most cases say (most, not all), the mere fact of turning non-exempt property into exempt property is not enough, you can do that. However, I think if you actually withdrew the funds the day after the BK was filed, you would be in the grey area.

In Re Addison (8th Circuit), No-072064; 072727, has a good discussion. These are the factors to consider.

(1) the transfer or obligation was to an insider;
(2) the debtor retained possession or control of the property transferred
after the transfer;
(3) the transfer or obligation was disclosed or concealed;
(4) before the transfer was made or obligation was incurred, the debtor
had been sued or threatened with suit;
(5) the transfer was of substantially all the debtor's assets;
(6) the debtor absconded;
(7) the debtor removed or concealed assets;
(8) the value of the consideration received by the debtor was reasonably
equivalent to the value of the asset transferred or the amount of the
obligation incurred;
(9) the debtor was insolvent or became insolvent shortly after the transfer
was made or the obligation was incurred;
(10) the transfer occurred shortly before or shortly after a substantial
debt was incurred; and
(11) the debtor transferred the essential assets of the business to a lienor
who transferred the assets to an insider of the debtor.

Usually the answers to 1,2, and 9 are YES in the BK scenario, but those, by itself, are not enough.

[lrprn]

Does that mean you can save up during your 13, or that you can start with that in a savings and be OK?

It means you can save up during your 13 AFTER filing.

If you had that much in an account before filing, then your state's bk exemptions (or the federal if your state allows it) must cover the *entire* amount of cash completely. Otherwise your trustee can take whatever isn't protected.

This is a discussion to have with your lawyer who is familiar with what is acceptable in your local court.

[bigstick]

[QUOTE=BKDefender;377048]bigstick
Ask your attorney about your ability fund your 2009 Roth IRA to the $5k/yr max, and fund your 2010 Roth IRA to the $5k/yr max. If your state exempts IRAs then you can do that and keep it through bankruptcy. If you withdraw it before 5 years there's a 10% penalty so you'd deposit $10k and get $9k out, but you wouldn't have to spend it all.
You can fund 2009's Roth IRA up until April 15, 2010. If your married you can fund your and your spouse's 2009 and 2010 Roth IRA allowing you to sock away $20k before filing BK and withdrawing $18k after you file. Legally you could withdraw it the day after you file BK but the trustee will already be upset about you doing something completely legal so withdrawing it immediately is just a slap in the face. I recommend my clients do this and withdraw it after they receive the discharge unless they need it sooner.

Great Idea, I'll check with him on that. I know my 401k is exempt so I'm assuming an IRA would be as well.

[BKDefender]

bigstick
Ask your attorney about your ability fund your 2009 Roth IRA to the $5k/yr max, and fund your 2010 Roth IRA to the $5k/yr max. If your state exempts IRAs then you can do that and keep it through bankruptcy. If you withdraw it before 5 years there's a 10% penalty so you'd deposit $10k and get $9k out, but you wouldn't have to spend it all.
You can fund 2009's Roth IRA up until April 15, 2010. If your married you can fund your and your spouse's 2009 and 2010 Roth IRA allowing you to sock away $20k before filing BK and withdrawing $18k after you file. Legally you could withdraw it the day after you file BK but the trustee will already be upset about you doing something completely legal so withdrawing it immediately is just a slap in the face. I recommend my clients do this and withdraw it after they receive the discharge unless they need it sooner.

--William

[NoTomatoCan]

StartingOver - Is that true in a CH13? I thought assets that were not exempted could be retained so long as your plan satisfies the CH7 liquidation test?

[StartingOver08]

I'm close to filing but just got back 10k from tax returns. Attorney has listed it as cash in a bank account. Can I do something with that before filing? Won't the trustee look back to see what i've spent my money on in the past few months?

The key is, can you exempt the funds in your bank account? If you can fit $10k of cash in your exemptions then you are ok. Its the funds that are in your bank account that are NOT exempted that the Trustee will want to be turned over to the BK estate. Some Trustee's are more insistant on this than others. Check your states allowed exemptions, including the cash exemption, here www.legalconsumer.com and then verify with your attorney.

[NoTomatoCan]

Yes, you can spend it on legitimate expenses. Things like home/auto insurance (pay it up for the year) are good. Legitimate home/auto repairs. I believe up to 6 months of household supplies (time to stock up at Costco or Sam's club).

Those are some easy ones.

[bigstick]

I'm close to filing but just got back 10k from tax returns. Attorney has listed it as cash in a bank account. Can I do something with that before filing? Won't the trustee look back to see what i've spent my money on in the past few months?