Question What to do with this check and how do I get ready for bankruptcy

[brank]

Hi,

It’s great to see many of you so supportive of one another. When I see such behavior, my outlook on humanity is a little brighter. So thanks for that.

Below is a brief summary of my situation, but right now, I’m trying to figure out what I should do with this check to me for $10,900. It's for work I performed this year. I thought perhaps making an estimated tax payment would be wise. I want to walk away from the bankruptcy with as much as possible and I want to protect this check and future ones. Any and all advice is much appreciated.

Cars: One is worth about $800 and one is worth about $4,500. Both are paid off.

$10,900 check in hand from state agency and $4,900 coming in three to four weeks for work being performed. No estimated tax payments made for 2012. All 2011 taxes have been paid except for $80 due to IRS. Self employed in a sole proprietorship business. For a month or two of the year, I’ll make $10,000 per month, but the other months I’ll make like $200 per month.

$50,000 in credit card debt. NEVER late. I have not stopped paying off credit cards, but I think I may start this month.

I intend to file for bankruptcy this year, hopefully Chapter 7.

[JessMN]

I'm not a lawyer and not a know-it-all bk guru either, but off the top of my head my initial thought is use it to pay your estimated taxes, a lawyer and your day to day bills (unless you have other income) forget the creditors - you may be able to exempt some of whats left and even if the trustee takes that as an asset, you wouldn't have to deal with trying to figure out which creditors to pay and the whole preferential payments thing. Not sure he'd take it anyway if you can prove your erratic income. Just a thought. Hopefully someone with more knowledge will give you advice!

[LadyInTheRed]

Welcome to BK forum, Brank.

What you should do with the check will partly depend on your State's bankruptcy exemptions. So, it's hard to help without knowing what state you are in. You could google "[name of state] bankruptcy exemptions" to find out if there is an exemption for cash or a wildcard exemption you can use. Also, look for the automobile exemption.

Regardless of your state exemptions, paying estimated taxes and attorney's fees seems like a good use for the cash.

Your uneven income will may make timing of your filing important. Because you are self employed, the trustee may request your financial records for the last couple year or more. So, get your records in order if they aren't already.

Read as much as you can on this site and make appointments for consultations with a couple (or a few) BK attorneys. Most BK attorneys give free consultations.

[kornellred]

That's quite an interesting dilemma you have there, Brank. Fifty grand worth of unsecured debt is a heavy burden, which in most cases is permanent unless you choose bankruptcy (which you should, because it makes perfect sense). On the other hand, hiding or transferring assets is the biggest no-no in the planning stages of a bankruptcy. Great big chunks of cash like you are talking about will definitely arouse the suspicions of trustees, even if you manage to convince your attorney (unless you are filing pro se) that you distributed the cash in permissible ways. My understanding is that quarterly tax payments for self-employed individuals is mandatory, and a gross overpayment might be seen as an attempt to "hide" an asset legally. A Chapter 13 trustee would likely require the surrender of a large income tax refund, or force you to use the refund for the next quarterly estimated tax payments and thereby increase your disposable income by default.

Nothing wrong with paying your attorney in full for the bankruptcy up front - you are likely to get better service that way. Solidifying your transportation needs is a necessary and expected way to use up cash assets - just don't buy a Porsche when a BMW will do. (!) You get the idea.

The goal of bankruptcy is not to hold on to as many assets as you can. The goal is to make the best of the assets that you will be allowed to keep.

[keepsmiling]

Without more info, it's hard to give you good advice. You might want to tell us your state of residence and your housing situation. But I'd guess you are under the median if most months you make 200 and will have no problem with a 7.

You are in much the same boat as we are. Unsteady income making it hard to plan anything at all. The GOOD news is that once you stop paying, it may be a long while til you are sued; self employed people with few assets are tough to garnish and may not be good lawsuit material.

I'd be willing to bet that by the time you get around to filing, there won't be much left of your big check. Do keep in mind that accounts receivable are considered an asset. You might want to time your filing when they and your cash on hand are at a low point.

Just curious....what's your health insurance situation? Could factor here.

[keepsmiling]

Oops, so sorry for my bad manners.
WELCOME to the forum!!!

[keepsmiling]

Someone recently had a great post on timing of filing for those of us in exactly this situation, vis a vis accts receivable..... I will try to dig it up, but if anyone else knows where it is, maybe you could post?

[brank]

Thanks so much!

I reside in North Carolina. I rent and am on a short term lease. My rent is $800 per month. I have no health insurance.

[keepsmiling]

That's what I figured.
What's your family status? Approximate income?
Not sure I'd be in a big hurry to file in your shoes.
Especially in your state, which is a non-garnishment state, I believe.