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    #16
    Since a recent ruling, bankruptcy attorneys are very cautious in how they tell potential debtors to acquire new debt or "spend down" cash (or cash equivalents). Many attorneys, now, will only hint at what to do by saying vague things. For example, an attorney might say: "your car is 5 years old? It's probably better to have a new one since a Chapter 13 last 5 years and that car will be 10 years old and probably reliable". You won't hear the same attorney saying "go buy a new car just before filing!".

    Bankruptcy pre-planning is neither illegal nor dishonest. However, actual fraud is what we condone. Another example is readily apparent since it is tax season. Many attorneys hint to clients that perhaps they should file their tax return, obtain their refund, and get some things fixed around the house, buy food, get some clothes, and otherwise spend down the money, before filing.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

    Comment


      #17
      Justbroke- I think you're right. I haven't been able to get a straight answer, which is why I'm feeling "judged".
      That's why his last statement really through me for a loop..."You can do what is necessary in order to support yourself and live, you cannot dispose of assets in contemplation of a bankruptcy which would deny you a discharge."

      Would this income that is due to me be any different from IRS taxes? Everyone seems to postpone BK till they've spent that money down. Seems like that would constitute disposal of an asset- knowing you were filing. Just so confused!

      Comment


        #18
        I think this would be "ordinary" income based on what (little) I know about how the IRS treats categories of earnings (whether earned or unearned). It could affect your numbers, but since you indicate that you'd file as a non-consumer, it's not an issue at all.

        If what you quote is what your attorney said, then that is precisely what I'm talking about! He can't directly tell you to go SPEND SPEND SPEND, but letting you know that it's okay to "take care of yourself" before filing!
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog

        Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

        Comment


          #19
          ok- so I asked him point blank to clarify and he responded....
          "There is nothing wrong with receiving the money and living on it and paying your bankruptcy.attorney fees. You just cannot pay family members and friends or prefer unsecured creditors or hide money."

          So, looks like it's fair to pre-plan with that money.

          Comment


            #20
            Originally posted by justbeach03 View Post
            Flamigo~ I'm don't expect anyone here to condone fraud (not what I'[m trying to do). But I understand that when people are owed money from the irs- its advised to take it and spend it down to live off of. I can't seem to get a straight answer from my attorney...he tells me to live off it in one sentance, then contradicts in the next sentance. Could someone could please decifer/weigh in on the the following email he sent?

            "If you make a final claim, you can live off the funds if you need to. If you file for Bankruptcy and have not filed the final claim, the Trustee will file it and use the proceeds to pay your creditors. You can do what is necessary in order to support yourself and live, you cannot dispose of assets in contemplation of a bankruptcy which would deny you a discharge."
            If you go ahead and file your claim you can live off those funds for as long as you need to or have to, keeping in mind the six months prior to filing as to what money you have coming in/going out, debts, assets, etc. will need to be provided to the trustee. So if you file for that claim, blow it quickly on stuff you need/want and don't use it as funds to live on as you would have used it for as if you were receiving income from your employer, it's obvious, as your attorney states in his last sentence, you are disposing of assets prior to filing a BK. If you file for BK before you file for your claim check, you know you have these funds coming to you at the time of your BK filing (again, you will be asked whether or not you know of anything owed you that could be coming in as funds/assets at the time of filing), the trustee will file that claim for funds and use those funds or portion thereof to put to what is owed to your creditors. If you file BK and do not mention anything about your knowledge of your claim that you will file later, you are commiting fraud. He is leaving the choice to you because he cannot advise you to commit any type of fraud. Have you retained this attorney? Doesn't sound like you have.
            _________________________________________
            Filed 5 Year Chapter 13: April 2002
            Early Buy-Out: April 2006
            Discharge: August 2006

            "A credit card is a snake in your pocket"

            Comment


              #21
              Flamingo &JB-Thanks for breaking down the cryptic wording for me. Yes, I have retained this attorney. That doesn't mean that he always speaks English to me. I did get him to clarify. Get it, spend it on necessary...I'm clear now! Thanks

              Comment


                #22
                OK- here's the new twist on this "saga". Looking at filing Non-consumer. I was originally told I could file 2 BP claims (1 personal income loss and 1 business profit loss). BP changed the rules and I had to convert my personal claim to a business claim, as they said I could just pay myself the income lossed from the business settlement amount. Therein lies the problem...if it is a business check, will I be able to write myself a check for lost wages for the past 6 mths and use the rest for debt payment? I can show Trustee the income I would have made based on salary vs unemployed now.

                I will obviously discuss this with attorney in the future, but would like to get feed back, so I can lazer focus my questions to him ($250 an hr isn't cheap). As a personal non consumer ch7, i will list the business as 100%interest. I don't think this would've been a problem before if it was 2 seperate BP claims, but now that it business I'm concerned about taking out the part that should've been MY COMPENSATION from BP. Thoughts?

                Comment


                  #23
                  Bump!

                  Comment


                    #24
                    Anyhow, why did you bump this old thread? I guess it's because no one answered? I did not answer this because it is outside the type of typical questions asked. These types of questions really require an attorney and/or a CPA.
                    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                    Status: (Auto) Discharged and Closed! 5/10
                    Visit My BKForum Blog: justbroke's Blog

                    Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

                    Comment


                      #25
                      If you have a mortgage on your primarily residence and have lived in Florida for at least two years, I would take the BP money and pay down or pay off the mortgage; assuming you claim the homestead exemption, it will exempt every penny of equity in your home. Caveat: IANAL.
                      C7 Filed: 2009-11-06 | 341: 2009-12-14: | DISCHARGED: 2010-02-09
                      Condo: Walked away due to 2nd mortgage intransigence; 1st foreclosed. Now totally DEBT FREE!!

                      Comment


                        #26
                        The problem is that there is no BP money yet! That's the holdup. In addition, the debtor always needs to be careful how they funnel money from a non-exempt asset into an exempt asset such as a home. If it is seen as a way to hinder, defraud or delay creditors, the exemption doesn't matter. However, fraud is a difficult condition for the creditor to prove.

                        When moving assets around, especially with bankruptcy looming, it's best to do some asset protection and bankruptcy pre-planning.
                        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                        Status: (Auto) Discharged and Closed! 5/10
                        Visit My BKForum Blog: justbroke's Blog

                        Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

                        Comment

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