Medical services during bankruptcy

[hormonal]

I asked this before kind of, but I am trying to clarify. I need to pay my portion of the fees for my midwife in the next few weeks ($2300). I am due in 6 weeks, may go even sooner. To continue medical care, I need to pay. I am getting a tax refund which should cover it and then some. I have been and am still receiving bi-weekly and soon weekly services. I've been making payments as I go along but very small payments each month since our budget is tight. We want to file BK in the next few weeks. If I take my refund and pay my balance will we need to wait 90 days to file? I keep seeing that people are taking kids to doctors and dentists with refund money, but I was told in another thread that it would be preferential to pay her.

I have a hard time believing that paying for medical services I need and am currently receiving, and the fact that by the time I pay, I could have the baby at any moment and be full-term, would be a preferential payment.

So I suppose my question is what bills can and can't be paid? I feel like there is a huge difference between paying Discover and paying for contemporaneous medical care.

[lrprn]

Before we filed in 2006, our Ch 13 lawyer told us specifically to *not* pay our dentist more than $600 total in the 90 days before we filed to avoid our trustee going after the money paid as a preferential payment (and we stayed under $600). However, we were paying for dental services already rendered, not pre-paying for future medical services and treatments like your payment to your midwife will be.

The key here is whether a pre-payment for medical services not yet received (no debt exists yet) will be viewed by the trustee the same way as paying for medical services already received (a debt does exist). It would help a lot to have an expert legal opinion about this from an experienced bk lawyer in your area who is familiar with how the trustee looks at large pre-paid medical payments like yours before filing. Have you retained a lawyer for your filing yet? Are you interviewing bk lawyers you could ask during your free initial consultations?

It's possible that you *might* have to wait more than 90 days to file after making the payment to avoid the possibility of a preferential payment (as unfair as thay may be), but only a knowledgeable bk lawyer can tell you whether that will be necessary in your situation or not. Let us know what you find out, ok? I hope everything works out in your favor!

[BKDefender]

The answer is still the same - take the tax return, put it in a Roth IRA - file bankruptcy. You'll lose 10% of it but you'll keep 90% of it and won't have the preference problem or deposit problem that the trustee can reverse.

You have a timing problem - either you need to file BK before you have to pay your midwife for her services, or you file BK after you use the services.

--William

[miindebt]

Isn't there a time limit between putting money in an IRA and filing ch. 7? Wouldn't you have to turn in statements of that account? I'm very curious about this....

[aces67]

What's preferential about it is that it's such a large amount.

Do you have a huge deductible or is she not covered on your insurance? Can you work out something else with her?

[Meatstick]

My son will be getting braces and we will be using $2500 of our tax return to make this happen. When I asked our lawyer said it was acceptable and not to worry.

[BKDefender]

miindebt:
No and Yes, if asked. No there is no time limit to convert non-exempt assets to exempt assets as long as you meet a few criteria: 1) don't sell non-exempt assets for less than fair-market value, or at least not much less than fair market value; and 2) don't use unsecured creditors to increase your exempt assets.
You can get $5k from your tax return from the IRS on February 9th (today), go to your bank and open a Roth IRA account today, wait a day or two for them to verify the funds have cleared and the account is created, and file bankruptcy on February 11th or 12th. You can then go back to your bank a couple days later, withdraw the $5k, pay the 10% penalty, get a check for $4,500.00, close the Roth IRA, and deposit it in your checking account - and there's nothing the Trustee can do to take that money. He'll complain about it of course but legally he can't take it. You must disclose the existence of the Roth IRA and the amount in it. Here most trustees want to see copies of bank statements. They'll see that the account was just opened, and how much is in it, and they'll comment about it, but it is yours to keep.
Of course - I'm only licensed in Nevada and this is the case here - your jurisdiction might be different (although I doubt it.)
Also, the definition of a 'preference' is basically a payment made to an unsecured creditor who receives more during the 90 days prior to filing BK than they will receive after you file BK. A preference is NOT a payment to a service provider for services rendered at the time of the payment where the fair market value of the service equals the payment, as long as the service (or the product) is not a luxury item. Braces are not a luxury item, medical care is not a luxury item, groceries are not a luxury item, but a Samsung 55" LED TV is definitely a luxury item so don't buy one just before BK :-)

--William

[whipster1]

Actually if you are able to itemize there is no penalty for using the roth for medical purposes.