Bank Levy forcing emergency BK - have a couple questions

[peculiar]

I screwed up and had $6000.00 in a Chase bank account...and a creditor's judgment caused the funds to be frozen. If I file for Ch 7 bankruptcy right away to stop the payment...will there be a problem when I immediately withdraw the money in that when you file you can only have a small amount in checking that isn't touched by the bk?

Thanks

[despritfreya]

Sorry, but, the money is gone. As it relates to a Chapter 7:

1. If the bank releases the money to the creditor before you file, the Chapter 7 Trustee will recover it as a preference if you file bk within 90 days of the creditor getting the money.

2. If the bank is still holding the money on the day you file, the money, less your $150.00 exemption ($300.00 if married) goes to the Trustee. If you try to take the money from the reach of the Trustee you will lose your right to a discharge.

Des.

[peculiar]

well that sucks. Is it different for ch 13?

[despritfreya]

Is it different for ch 13?

Yes.

In the Chapter 13 you would have to agree to pay the value of the non exempt asset (the cash) to your unsecured creditors over the life of the Plan. The problem is that at least 1 of the 13 Trustees in AZ will most likely not allow you to hold the $$ due to fear that you will spend it and then either drop out or try to convert to a 7.

You should consult with a local bk attny.

Des.

[peculiar]

I'm calling an attny first thing in the morning. I'm just trying to figure out how it going to go now. Thanks for your input. I dont understand the "1 of 13" Arizona trustee significance, though. Are you suggesting that there are 13 trustees and all 13 have to agree, otherwise if one doesn't then there is nothing that can be done?

[despritfreya]

Are you suggesting that there are 13 trustees and all 13 have to agree, otherwise if one doesn't then there is nothing that can be done?

There are 3 different 13 Trustees in AZ. I simply do not know which one would be assigned to your case. 1 of the 3 may require you to send him/her the $$. He/she handles cases in his/her own way.

Des.

[justbroke]

Of course Des is right; bankruptcy won't solve this issue easily. Sorry to read about your issues. Are you sure that $6K isn't exempt for other reasons? I would certainly consult with a BK attorney to see where to go from here, but that money is gone one way or another unless otherwise exempt.

[peculiar]

it looks pretty dire as for the 6K based on what you guys are saying. The only reason that much cash was in the bank was because I had just deposited it two days ago from my insurance company for my car that was stolen last month. I plan to ask my attorney if because I can prove it was cash for a car that otherwise would have been exempt...if that will make a difference....but I'm not expecting it to though. We'll see.

[despritfreya]

The only reason that much cash was in the bank was because I had just deposited it two days ago from my insurance company for my car that was stolen last month.

You add new info that changes everything - especially if there was nothing in the account before you deposited the insurance check.

Look at ARS 33-1126:

A. The following property of a debtor shall be exempt from execution, attachment or sale on any process issued from any court. . .:

5. All money arising from any claim for the destruction of, or damage to, exempt property and all proceeds or benefits of any kind arising from fire or other insurance upon any property exempt under this article.

_________________________________________

Your vehicle exemption was $5,000.00 if you are single and $10,000.00 if you are married (assuming you have no other vehicle with equity). The proceeds you describe, so long as they have not been commingled, should be protected up to $5,000.00 and you should be able to get the freeze released, only losing the difference (unless you can claim the $10K).

Des.

[peculiar]

What do you mean by commingled? I put it in our day to day checking account. We use a debit card from that checking account for day to day living. Will that make a difference? Maybe there is hope!

[despritfreya]

What do you mean by commingled? I put it in our day to day checking account. We use a debit card from that checking account for day to day living. Will that make a difference? Maybe there is hope!

You have to be able to prove that the money that is frozen is actually "proceeds" from insurance. The moment it is commingled with other money you potentially lose the ability to trace which $ came from insurance and which $ came from some other source. This becomes an issue if you had more than just a few bucks in the account when you deposited the check and then continued to add money thereafter. It can be an accounting nightmare. You should pull all of your bank records from just before the check was deposited up to the present day. Bring all of the info to the attny you are meeting with.

Des.

[locolady]

You have to be able to prove that the money that is frozen is actually "proceeds" from insurance. The moment it is commingled with other money you potentially lose the ability to trace which $ came from insurance and which $ came from some other source. This becomes an issue if you had more than just a few bucks in the account when you deposited the check and then continued to add money thereafter. It can be an accounting nightmare. You should pull all of your bank records from just before the check was deposited up to the present day. Bring all of the info to the attny you are meeting with.

Des.

I disagree you should easily be able to identify the 6k. I recently had a total loss car claim and we could not even get the money for 7 days. Your insurance company I am sure give you documentation of the claim and how much was paid and why. My loss was a car included in my bk and it was exempt. But the accident happen post 341 hearing and trustee no assets ruling. I was told it was not necessary to do anything, as it was not a prior existing insurance claim. I have no idea if you can claw back the money but proving where it came from should be easy...

[justbroke]

loco, it's true that co-mingling of funds creates HUGE problems. We had one BKForum member that lost otherwise exempt money because it was in an account with other funds. If you spend money from an account, just what money did you spend? Is it first in, first out? Some could easily argue that it's not so simple.

For peculiar, this means you may want to file before the bank distributes the money, or it may even get more interesting.

(Des practices BK law in Arizona, so if he says it's a potential issue, then it's a potential issue.)

[locolady]

loco, it's true that co-mingling of funds creates HUGE problems. We had one BKForum member that lost otherwise exempt money because it was in an account with other funds. If you spend money from an account, just what money did you spend? Is it first in, first out? Some could easily argue that it's not so simple.

For peculiar, this means you may want to file before the bank distributes the money, or it may even get more interesting.

(Des practices BK law in Arizona, so if he says it's a potential issue, then it's a potential issue.)

I was only talking about the question of where the money came from and the exact amount. Not knowing all the facts my comment was only answer to showing that the money was for her car replacement.

[tcreegan]

Hi all,

Accounting methods are the root of the comingling problem. You have $200 in your account, you deposit $100 of [special] money. You withdraw $50. Was that [special] money or money that was already there? justbroke hit the nail on the head, is it "first in, first out" or "last in, first out" The default position is "once you throw it in the pool, it is all water"

The best method is to put [special] money in its own account and avoid the whole comingling mess in the first place. If you have already burnt that bridge, find out how your trustee handles comingling or what your court has ruled on it.

...or get a CPA to swear that [whatever works in your favor] is "standard practice"

Hopefully it all works out for you, whichever path you take!

Tom in Colo