Advice needed - giving money to family for support

[pachoo]

Hi all,

I need some advice. We are considering filing BK in the near future (maybe 3 months out), but for over the past 2 years we have been giving about $2,000 a month to my sister to help support her (she is unemployed) and my two parents. This is to cover rent, food, utilities, etc. Also to help watch our kids. We do not claim them as dependents. Without this payment they will be out on the streets.

Is this considered a preferential payment?

Thanks to all. I am freaking out over this.

[scorpion35]

Hi all,

I need some advice. We are considering filing BK in the near future (maybe 3 months out), but for over the past 2 years we have been giving about $2,000 a month to my sister to help support her (she is unemployed) and my two parents. This is to cover rent, food, utilities, etc. Also to help watch our kids. We do not claim them as dependents. Without this payment they will be out on the streets.

Is this considered a preferential payment?

Thanks to all. I am freaking out over this.

yup it will be considered a preferential payment.
2 years at $2000 month =$48000 lots of money
trustee will probably ask your sis to give it back

[justbroke]

For your parents, it's actually okay to help pay expenses for elderly parents and this is clearly allowed and listed as an expense category. If you're helping siblings that have some sort of disability, this may be seen by the court to be a dependency, and also okay.

However, if you're paying for your sibling's living expenses to the detriment of unsecured creditors, the Trustee will probably not look favorably on that. If you have that much disposable income each month, it's easy to argue that you should be in a Chapter 13 and be required to pay back your unsecured creditors to the extent that the Means Test (or Schedule I/J) dictate. Without some sort of disability with the sibling, or if the sibling is not a minor, it may be a tough sell to the Trustee and court.

I'm sure that part of that money could be claimed as child care payment to the sibling. If it's not too much, under the average for your State, and both spouses are earning more than that amount -- to make it "reasonable" -- then it may work as an expense. Caring for elderly, ill or disabled parents is always allowed.

It's not a preference since they don't owe you any money, but it may be seen as a "conveyance". I don't know your intent, but the Trustee may see it as an avoidable conveyance. I'll still say that the parents may be okay, so long as they are elderly, ill, or disabled. You may be able to consider your sibling as an employee, providing childcare, but you would need to reflect such on your income taxes and, presumably, your sibling files tax returns annually showing such income (but that's another topic, really).

[pachoo]

Oh no...my sister and parents definately do not have 48k to pay.

Does this mean that our chapter 7 case will be thrown out?

I'm so depressed...

[justbroke]

Does this mean that our chapter 7 case will be thrown out?

No, not at all. I would sit down and pick 4-5 bankruptcy attorneys out of the phonebook... TOMORROW. Don't sit and dwell on this tonight, because nothing is going to change today, tomorrow or even in the next few weeks!

There are many options... but we're not even sure that the Trustee would even take any action or seek to recover that money. The Trustee could ask you (personally) to repay the amount and when that happens, they usually give you a year, interest free. Your attorney might even be able to negotiate that down.

However, that's IF and to WHAT EXTENT that is actually any sort of conveyance (or even preference, but I don't think it's a preference since no money was owed). I would, tomorrow, not tonight, sit down and go over the $2K/month and figure out what part goes to parents and what part goes to sibling. For parents, you shouldn't have any issue. For the amounts to sibling, you will need to look at how many hours of "child care" that sibling provides and figure out what it would cost "on the street" for similar childcare. You just need to build a case as to why you spend that much money on childcare.

[tcreegan]

Hi pachoo, welcome aboard!

This is the UST position on using the parental care as an expense on the means-test:

Line 35 Continued contribution to the care of household or family members
......includes only actual expenses, not anticipated
......family member must live with the debtor or be a member of debtors immediate family; parent, grandparent, sibling, child, grandchild
......elderly, chronically ill, or disabled person must be unable to pay the expense

But 2K a month is a whopping size expense......before you gamble with 2K, 24K, 48K you need a BK attorney who knows your district BK court and Bk trustees. Ultimately that is what it will come down to

Welcome aboard, don't get too depressed, lots of good folks here to help out!

Tom in Colo

ps: if you haven't gone shopping for attorneys yet, the wisdom of the forum is to shop around. I put together a little list of things to discuss before retaining an attorney based on what I have seen around here:

Communication: phone/email/face-to-face, secretary/paralegal/attorney, turnaround time on responses
Organizaton/work ethic: dot all i's, cross all t's or 'good enough,' document filed ASAP or 'before the deadline'
Competence: know the local trustees, judges, filed cases like yours, up-to-date on relevant court rulings
Retainer/Fee: exactly what is covered, what is extra, what to expect as 'extra'

[tobee43]

jb and tom and others have you given excellent advise here....

if it were me....i would WAIT AND WAIT and WAIT....to put as much distance between filing and those payments to your sister....

as this money was most likely earned income, it will show one what or another on your tax returns.....i don't think it's that common that a trustee looks at your 2008 and asked you what you did with all your income....however, once again, if you had all that dmi....(desposible monthly income)...be prepared that the trustee may not quite understand why you didn't but that toward your debt....the other questions is....do you still have that 2k monthly......???? as dmi??

this was not even a "loan" to her or from her to you....so, it will be somewhat interesting as i'm not really certain...one, not really knowing that they were going to file bankruptcy in the future, that helping out a family member because you "could"....would be that hurtful...that is unless you still have that income.

best of luck to you!

[BKParalegal]

This is not preferential payment at all! I repeat at all. You may not be able to use the contribution to family members(this is what this is contribution not preferential payments) in the means test. It depends on the circumstances, but just make sure that you find some alternative acceptable expenses. Contribute to a Roth Ira, get additional supplemental health insurance, life insurance etc. To eat up those funds if in case you fail the means test. File BK, then cancel that crap and you can go back to helping family. Do not over analyze it, and don't let people tell you differently. Explain it to your lawyer, if he or she doesn't get it, then move to the next one.

Good luck

[pachoo]

Thank you everyone for your advice and help... honestly I am an emotional wreck over our finances. My wife and I own a small biz and our lives seem like utter chaos (declining sales, poor paperwork, back taxes, high cc load) - not to mention trying to raise 3 young kids, working and trying to mend a difficult marriage...

Not to mention I think I am suffering from depression (very poor sleep, my mind has been in a hazy fog for 6 months now), and have thought about suicide one too many times but I always stop when i think about how it will affect my family.

I know I have diverted from my original post, but right now I just dont know what to do or where to even begin.

[justbroke]

pachoo, first realize that you are not the first and there are thousands of us here on BKForum to tell you that you WILL make it through this. It's a business decision. While this may temporarily affect your life and your family, you can CLEARLY see, from those of us who went through this, that it actually IS NOT all that bad!

I would take the advice suggested and go find a really good attorney. I've already pointed out how you can actually keep paying expenses for your parents -- if they are elderly, ill or disabled -- while still filing!

Feel free to talk to any of us here. There's no need to even entertain thoughts of ending it all. It's not worth it and it only hurts those you love the most. There is a way through this. Please seek medical treatment for any depression or other issues that you have. It's the best for you and your family.

[tobee43]

jb is so correct....many of us have been there and done that....and you'll make it, i know it's seems really difficult now....

i so agree with jb...get a GREAT atty...one that you can feel comfortable and trust to help you through this...they are out there!




ps...sorry for all my typos on my last post....but i hope you got the point...

[discombob1]

We've all felt similarly before. Start at the beginning... with an attorney and a physician. Go to your primary care doc, let him or her know what you are going through. It's not an easy road and your doctor or medical practitioner will have suggestions to get you through it. Like Tobee says, find a great attorney... interview until you find the right one. And finally, remember you are not alone! This is a great place full of people who understand and won't judge. Hang in there!

[daylate]

Ditto what tobee, justbroke and others said-find a good lawyer and a good doctor. In my opinion you maybe should do the doctor first to try and help get your emotions/mindset under control. If you are depressed then it is just that much harder to deal with this stuff. and take solace in knowing you are not alone. We have all been or still in similar situations. And kudos for helping your sister and parents.

[scorpion35]

Thank you everyone for your advice and help... honestly I am an emotional wreck over our finances. My wife and I own a small biz and our lives seem like utter chaos (declining sales, poor paperwork, back taxes, high cc load) - not to mention trying to raise 3 young kids, working and trying to mend a difficult marriage...

Not to mention I think I am suffering from depression (very poor sleep, my mind has been in a hazy fog for 6 months now), and have thought about suicide one too many times but I always stop when i think about how it will affect my family.

I know I have diverted from my original post, but right now I just dont know what to do or where to even begin.

trust me you're not alone
u need to go see doctor first and then a good bk lawyer

good luck

[panda]

Yep, doctor first. I went down this same road myself, as many of us have. I have been severely depressed for several years, I believe because I knew where all of this was heading some time ago. We also had a failed business. My doctor has literally held my hand every step of the way since I broke down in front of her right after finding our attorney in August of last year. I was already on anti depressants, she added in zanax, which I believe saved me from the nut house. Since we discharged in February I am off the zanax and slowly decreasing the anti depressants. I actually finally feel like we are making it, once again. This truly has been the worst thing to happen to us,and we have raised a disabled daughter, which was no picnic.

I felt like our lives were over, but now being on the other side, it was worth every effort to get to this point, so we could be stable and at peace once again.

Take care of yourself first, then the other things will fall into place.