Credit cards vs. debit cards

[fingrrrl]

I am well aware that you are not permitted to charge luxury items on your credit cards less than 90 days before filing bankruptcy (up to $1500) and that even charging little items of smaller value is also considered a no-no. I'm wondering, does the same apply with debit cards? I know that trustee rarely if ever looks at a filer's checking account statements, but if they do and there are alot of debits for nonessential items in the few months before someone files for bankruptcy, does this count against them? I ask because I would say in the past two months or so, I've spent about $400-500 on nonessential items. It's not like if I had applied that money to any of my creditors that my problems would have disappeared and I wouldn't have to be filing for bankruptcy (my payments when I was still on time were $200 a month minimum per each of my four cards, and now since I haven't been paying, each one has a minimum due of $1150 to bring me current) and I did pay the creditors that I could, my retail store card, my $500 limit Capital One, my car and insurance. Would this count against me during my creditor meeting and how often does a trustee really look at a no-asset case's checking account? Thanks so much for any help.

[mymymy]

Oh Boy.

First of all, where did you get the idea that the trustee does not "usually" look at your checking account? That is far from the truth and is becoming more and more common with the approach of the new BK Reform. The days of "presumption of discharge" are quickly coming to an end. The "presumption of fraud" is the new catch phrase. A lot of trustees are asking for 2 years worth of statements.

Secondly, if you are filing for a Ch 7 BK, you are supposed to be insolvent, which means that you don't have enough money to even pay your neccessary living expenses, or at least are at break even.

You are in for a rude awakening if you think you can walk into a 341 and reply to the trustee, when asked about your expenditures; " I have been spending cash on non-neccessities because I have all this extra money". Think about it.

Also, if you have chosen to pay "some" unsecured creditors and not others.. that is called preferential payment and can cause considerable head-aches.

[HHM]

Oh Boy.

First of all, where did you get the idea that the trustee does not "usually" look at your checking account? That is far from the truth and is becoming more and more common with the approach of the new BK Reform. The days of "presumption of discharge" are quickly coming to an end. The "presumption of fraud" is the new catch phrase. A lot of trustees are asking for 2 years worth of statements.

Secondly, if you are filing for a Ch 7 BK, you are supposed to be insolvent, which means that you don't have enough money to even pay your neccessary living expenses, or at least are at break even.

You are in for a rude awakening if you think you can walk into a 341 and reply to the trustee, when asked about your expenditures; " I have been spending cash on non-neccessities because I have all this extra money". Think about it.

Also, if you have chosen to pay "some" unsecured creditors and not others.. that is called preferential payment and can cause considerable head-aches.

Ditto, most trustees want you to provide at least 3 months of bank statements at the 341 meeting. However, minor transactions may not raise a red flag. I suppose it depends on what you mean by non-essential itmes, can you gives us an example.

Also, most cases are not no-asset cases, since most people have to surrender some amount of their tax refund (assuming they get a tax refund).

[CCareEvil]

With this issue, it seems to make a big difference in where you file. In my state (WV), trustees do not usually ask for bank statements. When I went for my 341 hearing, nobody had to show any statements. I am faily certain nobody would have had them anyway since we were only instructed to bring a photo id and ss card. Your attorney will know whether this will be an issue or not. I cannot imagine having to show 2 years worth of bank statements. It seems there would have to be a very strong suspicion of fraud, not a typical case. Also, preferential payment issues would probably only apply if large payments were made to certain cards.

[edwards2]

In Tennessee we were asked to submit one month of bank transactions to provide documentation for our monthly expenses. We were however, told to provide it after our 341 so I guess the U.S. Trustee's office wanted the information. Most of the people who filed the day we did had to provide financial information. And yes...rude awakening time...the trustee does look at the bank statements. One couple who were called before us was in the "hot seat" a long time. The trustee asked them a lot of questions. They even had one of their creditors there who really drilled them. Point being you just never know what the trustee will ask so you need to be prepared. And by the way we were sweating some of our monthly expenses because we thought the trustee would think they were too high; they were however, for essential items. Luckily, she did not question them. Our attorney told us not to selectively pick a creditor whose card we wanted to keep; that would show preferential treatment. I agree, from what we have heard in Tennessee, the trustees are demanding more and more information to support the BK cases.