Why You Should Spend Money Before Declaring Chapter 7 Bankruptcy
Our Mesa Chapter 7 bankruptcy attorneys take a look at the proper things that you should spend your money on when preparing to file for chapter 7 bankruptcy protection in Arizona. Frequently, mistakes are made by people in Arizona who are preparing to file for bankruptcy. These mistakes can be costly. Seek the assistance of an experienced debt relief attorney who can easily guide you with your bankruptcy preparing.
Maybe you just received your tax refund, an inheritance, settlement, or otherwise have money in your bank account that won’t be exempt in a Chapter 7 bankruptcy. Often, this puts you in a unique position where you actually need to spend a significant amount of money before filing your bankruptcy petition. Otherwise, it could be taken by your bankruptcy trustee to pay your creditors. But that doesn’t mean that you can, or should, spend these funds on luxury vacations and designer clothes. If you’re looking to deplete your bank account before declaring Chapter 7 bankruptcy.
Some Reasonable Expenditures That Won’t Cause Issues With Your Bankruptcy Trustee
- Clothing and school supplies for your children: If you have kids, you know how easy it can be to spend a tax refund or other payment while shopping for them. Purchases like notebooks, school uniforms, etc. are almost always deemed reasonable in a bankruptcy court. Keep your receipts for these kinds of items in case your trustee has questions about purchases at stores that also sell discretionary items.
- Funeral and burial expenses: Arizona has an exemption of $1,000 that can be used for a burial plot. While thinking about your own death can be morbid, it can reduce the amount your children have to spend when you pass away.
- Household goods: Almost everyone can go through their kitchen, laundry, or garage and find items that need to be purchased, repaired, or replaced. The exemption for this category of possessions in Arizona is $6,000. If you’ve been wanting to replace an old mattress, stock up on cleaning supplies, or buy any other reasonable household expense, now is your opportunity. Be careful with gift cards, as these can be treated as cash by the bankruptcy trustee. You should keep receipts for these kinds of purchases, so the trustee can make sure funds at certain stores weren’t spent on anything trivial.
- Dental and health care: If you’ve been putting off dental work or health care when juggling debt payments, now may be the time to finally get it done. Regular checkups are also a reasonable expenditure before bankruptcy. So if you’ve been putting off a root canal, septoplasty, or any other reasonably necessary medical or dental procedure, this could be a good opportunity to finally get this work done. However, the bankruptcy trustee won’t approve of elective or cosmetic procedures.
- Prepaid rent: If you rent your residence, it’s probably one of your largest recurring expenses. Unfortunately, Arizona’s bankruptcy exemptions haven’t quite kept up with Arizona’s skyrocketing rental prices, reducing how many months’ rent you can prepay as bankruptcy spending. The exemption for prepaid rent in Arizona is currently $2,000.
- Car maintenance and repairs: If you’ve got a chunk of change you need to spend before filing bankruptcy, the mechanic can be a good place to spend it. You might just need an oil change and to replace your filters, or there could be more serious- and more expensive- issues with your vehicle. Bankruptcy trustees understand that having access to a vehicle can be crucial for employment and childcare, so car repairs before bankruptcy will usually be interpreted as reasonable spending. However, the trustee is less likely to approve of cosmetic car work like rims or a new stereo system.
- Bankruptcy attorney’s fees: While it seems counterintuitive, filing for bankruptcy comes with significant costs. If you’ve got cash to spend before bankruptcy, you should consult with bankruptcy attorneys to learn about their payment options before spending it. A big factor will be whether you are going to file Chapter 7 bankruptcy or Chapter 13 bankruptcy. The total attorney’s fees for a Chapter 7 bankruptcy are typically lower than a Chapter 13 bankruptcy, but Chapter 7 attorneys will typically require more payment up front. This is because attorney’s fees can be worked into a Chapter 13 payment plan, allowing bankruptcy attorneys to charge a reasonable retainer and receive full payment as the case proceeds. Attorney’s fees are an unsecured debt, meaning they are wiped out in a Chapter 7 bankruptcy filing. That’s why most Chapter 7 bankruptcy attorneys require full payment before your case can be filed.
Purchases To Spend Money On To Avoid Before Filing Bankruptcy
While it’s best to stick to the list above when spending before bankruptcy, your case probably won’t be dismissed for a night out to dinner or a new pair of shoes. However, there are some expenditures that will immediately get your bankruptcy trustee’s attention.
Let’s say your parents loaned you a few hundred dollars for a repair or other expenses around the house. You also have significant credit card debts, and a few other miscellaneous unsecured debts. You secure the funds to repay your parents, and a few weeks later, declare bankruptcy. This is an example of a preferential payment. Here, you would be giving preference to your parents over your credit card companies and other creditors. The bankruptcy trustee will most likely ask your parents to return the funds so that they can be distributed more fairly among your creditors. Or, the trustee may require that you repay the funds yourself to the bankruptcy estate before your case can proceed.
While it probably sounds obvious, you should avoid spending on luxury items while preparing to file bankruptcy. You can’t game the system by maxing out your credit cards just to discharge them with a bankruptcy filing. The trustee will review your credit card transactions to make sure you aren’t abusing the bankruptcy system. You may not spend more than $725 on luxury purchases on your credit cards in the 90 days before your filing. You also may not use your credit cards for cash advances of more than $1,000 in the 70 days before you file.
Call Today To See If You Qualify For Our Zero Down Chapter 7 Payment Plan
Let’s face it- paying for a bankruptcy attorney up front isn’t ideal, even if you have money you need to spend before you can file. For example, if you’ve got the money for car maintenance or your attorney’s fees, you could be put in a bad position later on if your car breaks down after paying for your Arizona Chapter 7 attorney up front. Our bankruptcy attorneys have several years of experience and know just what our clients need. That’s why we implemented our Zero Down Chapter 7 bankruptcy payment plan program.
Eligible clients can use our zero down program to set up a payment plan that can last up to 12 months after your date of filing. Your payment plan includes a zero percent interest rate and credit reporting, which can help improve your credit score after your bankruptcy discharge. We make this possible by filing a skeleton petition before your full petition. Work completed before the skeleton petition is pro bono, and you can begin accruing debt again after the skeleton petition is filed. The work completed on your case after that point will be financed into an affordable payment plan.
Find Out The Difference Our Mesa Zero Down Bankruptcy Firm Can Make
See the difference our affordable, experienced Arizona bankruptcy attorneys offer for yourself by calling 602-609-7000 or filing out our online form to schedule your free consultation. Our AZ Bankruptcy Attorneys offer a Zero Down Bankruptcy option. If you have the need for an emergency bankruptcy filing, our Mesa Bankruptcy Lawyers can file your case in the same day, if necessary. As one of Arizona’s top bankruptcy filers, our bankruptcy team is very seasoned. Contact us today for a free consultation and debt evaluation with one of our experienced Phoenix bankruptcy attorneys.