Inherited some money.. now what do i do.

[Brokecoloreefer]

Im still in the waiting phase before filing chapter 7, i have dont more research since my last post and found out that i have about 35K in debt. Last week my wifes grandfather passed away and left us 15k. I called a few debt consolidation places, i wanted them to take that 15k and try to settle our debt as best we could. They told me that the creditors wont settle unless i was in serious default. Im in default, but apparently not serious enough. Im paying about $10 per month to each creaditors when the minimums are in the $150 range.
So, here is my question, what do i do with it? i dont want to pay them off and still have a debt that i cant afford and end up filing anyway...
One thing i would like to do with it is buy a tractor to keep my drivway snow free (i live at 9000' in the rockies and have a heck of a time all winter with my drive) I have to pay about $200/ month in snow removal fees. It would be nice to have my own means of doing that. But here is the thing, that estate check is already depositied in my wifes account, i assume i have to report that. The tractor would not be titled, you just pay for it and drive away.. so i dont know what kind of property that is.. and i dont know how leagle it is to transfer the money in my inlaws account and have them purchase the tractor.
Is it possible for me to file by myself and my wife not file? That way the check is in her name...
I dont want to go to jail, but i dont want to be totally illeagle either... i dont mind a grey area, but i dont want to blatently break the law.
Thanks again for your help.

[HHM]

Regarding the inheritance...odds are, there is no asset exemption to cover it directly, so if you filed chapter 7 BK (assuming you qualify for chapter 7 in the first place), the trustee would take that money to pay your creditors. That may not be such a bad thing overall because any remaining debt you owed your creditors would be wiped away. (think of it as forced settlement on your creditors).

However, why give up the $15K when you probably don't have to. What you need to do is turn that money into an exempt asset. I am not sure buying a tractor would work unless CO has some exemption that can cover the tractor. Something like an IRA might work, (except the trustee may object if since the contribution would exceed the maximum tax free contribution, but that is another issue). In any event, all it comes down your state's asset exemption laws. Moreover, once you move the cash into an exempt asset, you want to hold out to file BK for a little while to avoid "obvious" suspicion of fraudulent transfer.

Filing on your own, without your spouse, will probably NOT protect the cash.

Moreover, giving the money to your in-laws is a HUGE red flag and will almost certainly raise an objection by the trustee and the trustee will SUE your in-laws to get the money back (regardless of what they did with it), so definitely do not do that. This would be text book insider fraudulent transfer.

Also, stop paying your creditors. If your only paying 10$ per month, why pay anything. You are NOT buying yourself any "goodie" points by making those payments, so stop.

Don't bother with debt consolidation places, they rarely help.

[Brokecoloreefer]

thank you,
we are paying the creditors something just to hold them off from garnishing our wages. If it does no good, then i will stop.
If my wife bought a tractor, or atv with plow, or a plow blade for our truck, with a check made out to her and i filed bankrupcy, it would still be taken for auction?
One point im confused about, is if i gave the trustee the 15K, and he paid the creditors and erased my debt, then what is the difference if i gave them 0 dollars and he setteled my debt anyway.. im still stuck with the BK.
here is a cut and paste from the CO exemptions:

Horses, mules, wagons, carts, machinery, harness and tools of farmer to $25,000 total (same $25,000 limit for debtor or debtor plus spouse)

Im not a farmer, but the equipment would be necassary for me to maintain my property, is there any angle on working this exemption?

Here is the other problem, my wife is pregnant, she is working very part time and is planning on taking 6 weeks off when the baby is born, she is not due untill june, we need some of that money to pay the attourney and pay for living expenses while she is on leave. This ties into the reason im paying these people something, it will be at least 4 more months before we can start filing, otherwise we will have no money to live on during my wife's leave of absensce. IF i stick it all in a retirement account, i cant get it back out without penalty, which is why im just inclined to spend in and save what we need for us to live during the 6 weeks she will be off.
Also, i didnt think about taxes on that money, i guess its so recent that it just hasnt setteled in that its there.. how much of that will have to go to taxes?

[HHM]

we are paying the creditors something just to hold them off from garnishing our wages.

A default is a default...but to garnish your wages, they have to sue you first, but credit cards are loath to sue. It will usually be 9 months to 2+ years before anyone actually gets around to suing you to garnish your wages. There is no law that says as long as you are paying something, they cannot sue you. You are in default, they could sue you now if they wanted (but they don't). So just stop paying.

I don't know all the ins and out of the exemption, but I strongly suspect that to use the "farmer tools" exemption, you have to "earn your livelihood" from being a farmer. After all, the purpose of the exemption is to allow the farmer to earn his keep. So if you are not a farmer, I don't think that exemption will work for you.

At this point, you might as well consult with a few BK attorneys. It will be hard for any of us on this forum to give you concrete advice about your situation because your questions ar very specific about your state law.

Unfortunately, BK doesn't exactly allow you to have your cake and eat it too, you have $15K in cash (minus taxes) sitting around which would not be exempt. The one thing you do have is TIME. I doubt you're under any real threat of having your wages garnished, it takes a lot of time and effort for a creditor or collection agency to get a garnishment, and you will know WELL IN ADVANCE before it happens.

There are people on this forum that have going 4+ years before a creditors got around to legal action. Granted, you will have to tolerate fairly aggressive collection tactics (i.e. constant phone calls, possible calls to your family, and work, etc).

If you want to "use" the $15K, my advice would be to hold out as long as you can before filing BK. At least until after your wife has the baby (you will have numerous unplanned for expenses with that ordeal).

[Brokecoloreefer]

thanks alot for the advice.

[Brokecoloreefer]

Well, i have another idea on how to be leagle and fix my snow problem, i can put a snow plow blade on my pickup truck that im currently upside down in. The rest of the cash i will put into a IRA. Does that sound like it would be leagle and the right thing to do?
Thanks again.

[HHM]

I suppose that would probably work. You probably would not even list the blade as an asset on your BK petition anyway. (you don't really need to list accessories). But then again, maybe the trustee[s] in your area are wise to this kind of thing, but who knows.

I think your idea will be no problem. Good luck.

[Brokecoloreefer]

Heck, i will list it with my truck, its 4k upside down, the plow is $3500 and i have a 3k exemption. It should be no problem. Awesome advice around here.. i will check back in a few months and post a update.