Checking accounts and paying bills after filing

[Rona123]

Hi all,

Because I'm not a big fan of the search function on this forum since it's almost impossible to find what you're looking for, I'm going to ask a question that's probably already been answered a dozen times.

So I'm filing for BK7 tomorrow, and my attorney advised me to clear out my checking account, since they'll take whatever cash I have on hand when I file. Is this a snapshot thing, meaning I can't have that cash on hand the day I file, but it's ok, for example, to have the cash from my next paycheck? I've heard mixed messages about having an open checking account before discharge, so I'm curious about how others have handled the situation as far as getting paychecks, paying bills, etc.

Am I ok opening up a new account after I file and then transferring direct deposit to that, or do I need to be on a cash/money order basis until my case is discharged or closed?

Any thoughts or advice is appreciated!

Ron
T minus 24 hours...

[JeepMom]

The trustee may look and see that you pulled out cash 24 hours before filing, it looks fishy.

If you are talking a low cash amount I wouldn't worry about it. We had $200 in the account(filed joint) so who knows?

[SinkingFast]

I've asked that question in Consults. Hubby is paid by direct deposit. So one day it looks like a lot of money, but then checks float through and it's all gone.

What if the Trustee looks at the acct the day Hubby gets paid and takes all our money??

The attnys have all said, the Trustee is looking for average amounts, not spike balances. The Trustee is supposed to look at your bank acct over a period of time, not a window in time. If a large sum comes in and then goes out again, they know that's pay coming in and bills going out. If a large amount is constantly available, the Trustee will go after the amount that stays on hand.

One thing we've decided to do when we get close to actually filing is get Cashier's Checks or Money Orders made out for our expenses. Rent, car payment, and such. Our landlord sometimes takes 2 weeks to cash our rent check. We don't want the Trustee to just take that money and then we have the rent check bounce.

Maybe instead of just taking out cash, you get Cashier's Checks or Money Orders for bills you know you are going to pay. You get them for rent/mortgage, your attny's fee, auto insurance if it's coming due soon. Then you'll have those on hand for when the bill comes and you won't have to worry about the checking acct.

[StaciMM]

I think its generally recommended to pay your bills before filing, not to take out cash. Cash on hand is an asset just like money in the bank. But, if you can go ahead and pay utilities, etc. then that is good. (Preferably places that can do a debit transaction so the amount clears quickly.) If your bank says you have $1000, it won't matter that your register shows you've sent out checks that have not cleared.

Most people have certain days/dates where it looks like they have money in the account, but in reality it is already 'spent'. If you don't have a way to exempt that, you want to file after it has already been deducted. For example, I pay my rent on the 15th but I send a check. It usually isn't cashed until the end of the month. I filed on the 12th of a month, a Monday, so some of my rent money was already in my account, waiting on my direct deposit (Thursday the 16th) to hand over my rent check. I listed an exemption to cover the $400 or so that was in my checking at the time I filed.

After the day of filing, its business as usual. Money comes in, and goes out to pay bills.

[StaciMM]

Ps-great idea on the money order/cashier's check to pay the rent! You have a receipt for the money spent, without it sitting in your account. I posted my response before reading yours, SinkingFast, guess we're in the same boat regarding our rent checks being cashed!

[FoolAndHisMoney]

Ps-great idea on the money order/cashier's check to pay the rent! You have a receipt for the money spent, without it sitting in your account. I posted my response before reading yours, SinkingFast, guess we're in the same boat regarding our rent checks being cashed!

I pay my rent with cash. I have reciepts though from my landlord.

[Rona123]

Great, thanks for the information so far. I will have a big withdrawal on the day I file, but that will be to pay my lawyer, and every penny I currently have in my checking account will be his.

But if I understand correctly, it sounds like I'll have no problem having a checking account during the whole BK process, as long as there is no money in there on the day of filing or at a high enough level to raise red flags afterward.

The one issue I do have is that I will have is that I'll need to open up a new one. I currently have a credit card account from the same bank as my checking, and my attorney says I'll need to open a checking account at a new bank, or the old bank would try to claim any money in my checking account to cover my credit card debt post-filing.

[StaciMM]

Might be good to try to open a new checking now-alot of places run credit prior to openinga checking account. For those that do, will be easier without the BK, and for me, the BK showed within a few days of filing...

[so-beyond-broke]

Please clarify Staci

Hi Staci:

So are you saying that its best to file on a day when you have no money in your account? My child gets an SSI check at the 1st of the month which is direct deposited into my checking acct. I have also signed up to have direct deposit of my check into the same account (whenever this happens). I usu. get paid on the 1st & 16th - so would it be best to file lets say the 28-30 when I have little or no money? So if I filed Bk March 30 and got paid on March 31/ and got the SSI on April 1, then the trustee can't bother me the days after I filed because as you said its business as usual right? When you file for Bk the trustee should be concerned only with the preceding 6 months up to the day you file right? I read somewhere in the laws that certain income is protected such as social security, unemployment, welfare, etc; therefore the trustee should not touch a portion of my bank acct $$ because its money that I receive for my child and when its deposited every month it says US Treasury with the date and amount.

so-beyond-broke

I think its generally recommended to pay your bills before filing, not to take out cash. Cash on hand is an asset just like money in the bank. But, if you can go ahead and pay utilities, etc. then that is good. (Preferably places that can do a debit transaction so the amount clears quickly.) If your bank says you have $1000, it won't matter that your register shows you've sent out checks that have not cleared.

Most people have certain days/dates where it looks like they have money in the account, but in reality it is already 'spent'. If you don't have a way to exempt that, you want to file after it has already been deducted. For example, I pay my rent on the 15th but I send a check. It usually isn't cashed until the end of the month. I filed on the 12th of a month, a Monday, so some of my rent money was already in my account, waiting on my direct deposit (Thursday the 16th) to hand over my rent check. I listed an exemption to cover the $400 or so that was in my checking at the time I filed.

After the day of filing, its business as usual. Money comes in, and goes out to pay bills.

[bkfiler]

without reading everything...

1 - its best to go open a new bank account before you file bk with the court if you only have a bank that you are bk listing for their credit. or if its wells fargo. they will snatch your money regardless sometimes.

2 - take all you money out of your accounts just to be safe. if its government money then they cant take it bu tyou will have to show them that and prove it before you gete your money back.

just be safe and smart. simple as that.