Sale of stocks prior to filing

[dover]

I hitting you guys hard with so many questions! Okay, I have a little money in stocks. It would amount to about $4,000 if I sell it. Again, I haven't filed yet and was wondering if this is also something I need to do 90 days prior to filing. I need th money for cushion and most likely for a car.

[HHM]

If you sell them before you file, you will need to be prepared to do two things (1) spend it, at least most of it, (2) and be able to explain to the trustee what happened to the money.

Unless these stocks are in some sort of retirement account that can be exempted, then you probably should sell them and use the money. If these stocks are marketable securities (i.e. traded on major exchanges), the trustee would be entitled to take the stocks and sell them for the benefit of your creditors.

Note, you cannot have too much cash lying around when you file BK unless you have an exemption. Any asset that can't be exempted is fair game for the trustee, and unfortunately, most states don't have a meaningful exemption for cash on hand. So don't get the impression that you can go into BK with a couple thousand dollars in your account to help pay future living expenses.

Also, you need to be a little careful (or at least educate yourself) when buying a car right before filing BK. Especially if you are going to pay cash for a car, you need to make sure the car you buy will not be worth significantly more than your state's allowed equity exemption. I use the word "significantly" more because you can have a car that has more equity in it than you can exempt because the trustee has to sell the car at auction and therefore does not receive a "market" price for the car and there are some minor costs of sale, so you have some wiggle room.

[dover]

Thanks for the information. I am not planning on buying a car now but I might lose the one I have now in the bankrupcy so I need to have something to put down on a car after I get discharged. The money I have in my bank account is barely enough to pay my mortgage and other household stuff.