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Large cash purchases before bankruptcy

dave024
New Contributor

Large cash purchases before bankruptcy

Are there any sort of restrictions on making large purchases in cash shortly before bankruptcy? I know there are restrictions on luxury items and cash advances on credit, but are there any restrictions on what I can spend my regular income on? I don't have any available credit at this point so any purchases I make would have to be "cash."

Message 1 of 27
26 REPLIES 26
RealNameNotAllowed
Contributor

Re: Large cash purchases before bankruptcy

I spent $4k 2 months before my BK and they asked for an explanation of the expentiture. It was used to pay rent so the courts didnt care. So I would have an explanation ready to explain the purchase.


Start: May 2016 EX 424 (Lawyer) Current: December 2016 TU 641 (Discover Card)
My Timeline: http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/My-Story/td-p/4784950
Last Hard Pull: October 2016 (Discover Card)
$400 Credit One 8/2016 Balance $0 {|} $200 Discover (Secure) 10/2016 Balance $0
Message 2 of 27
dave024
New Contributor

Re: Large cash purchases before bankruptcy

Interesting, thanks for your response. I'm wondering what would happen if the expense was frivilous. I'm not trying to waste money I am trying to spend it on something that is important to me. As I mentioned in another thread I am meeting with a lawyer next week and this is one of the main things I want to run by them as this expense is coming up soon, but until then I'm tying to understand more what is allowed and what isn't.

Message 3 of 27
RealNameNotAllowed
Contributor

Re: Large cash purchases before bankruptcy

What does your asset structure look like? House, car, boat, lambo, large cash stash? If you dont have alot of assets you may be able to use the exemption for your cash stash.


Start: May 2016 EX 424 (Lawyer) Current: December 2016 TU 641 (Discover Card)
My Timeline: http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/My-Story/td-p/4784950
Last Hard Pull: October 2016 (Discover Card)
$400 Credit One 8/2016 Balance $0 {|} $200 Discover (Secure) 10/2016 Balance $0
Message 4 of 27
dave024
New Contributor

Re: Large cash purchases before bankruptcy

Not really much in the way of assets. I do "own" a car (I am making payments, and owe slightly more than the car is worth). I probably have about $10 cash and the extent of my property is probably some electronic devices and furniture.

 

I'm not really trying to hide assets or anything. I'd like to make a large payment to someone (after I get paid a couple more times :] ) and I'm just wondering if that would be in any way frowned upon by the bankruptcy court.

Message 5 of 27
Em71
Frequent Contributor

Re: Large cash purchases before bankruptcy

I believe that you said you made over $5000 in cash advances recently. I would think that a large payment to an individual after that might provoke questions. It seems suspicious even if it is not an attempt to hide anything.
Message 6 of 27
dave024
New Contributor

Re: Large cash purchases before bankruptcy

In this case it is less an "Individual" and more a business for services. Is there any requirement for what I do with my income currently? Surely I don't need to throw it away at my debt that I'm about to have eliminated in bankruptcy.

 

I'm sure my cash advances will raise questions. I am definitely hopeful I can get that issue resolved amicably. Addiction can be a terrible thing and it takes a while to start putting everything back together, but I'm slowly working on it :-)

 

Message 7 of 27
donny10
Senior Contributor

Re: Large cash purchases before bankruptcy

Taking a 5k cash advance on a Cap1 card and making luxury purchases on it and never making a single payment should more than raise questions.

Message 8 of 27
StartingOver10
Moderator Emerita

Re: Large cash purchases before bankruptcy


@dave024 wrote:

Not really much in the way of assets. I do "own" a car (I am making payments, and owe slightly more than the car is worth). I probably have about $10 cash and the extent of my property is probably some electronic devices and furniture.

 

I'm not really trying to hide assets or anything. I'd like to make a large payment to someone (after I get paid a couple more times :] ) and I'm just wondering if that would be in any way frowned upon by the bankruptcy court.


You need to carefully explain to your attorney what you plan to do before you do it so s/he can advise you appropriately. From your post, it almost sounds like a preferential payment for goods or services that you have not yet received. Yes, that is frowned upon.

 

My personal opinion, it sounds like something that would get the trustee's attention in a negative way.  This is one of the reasons you have to supply all of your bank statements and credit card statements for the trustee to review.  They want to know all of your assets and all of your debt. I know I had to supply more than a year's worth of statements for everything.  It's been quite a while since I was discharged (file date 9/08 and discharged Jan 09), but believe me, this is not something you forget. 

 

Message 9 of 27
dave024
New Contributor

Re: Large cash purchases before bankruptcy

I will definitely run everything by an attorney. I am sure I can make some purchases of new goods and services and it sounds like I am pushing some limits. 

Bankruptcy is a new area for me, so I am sure I will pop in with questions. I have never had a late payment before and now all my accounts are going on 30/60 days past due. I am not sure what to do about the cash advances. I can't really change the past. I can't make large preferential payments to them just because of that. Is the trustee expecting me to be making any efforts to repay debts during a chapter 7?

Not sure how long I should wait. My last cash advance was Oct 24. I think most of them were a week or two before that. Capital One actually increased my limit after I maxed it out with cash advances the first time. 
Most of the "luxury items" were purchased by Mid November. Some of these things I had actually intended to sell but actually ended up getting robbed in a craigslist type transaction. Talk about a string of bad luck.
It sounds like I would be looking to file around Mid February at the absolute earliest, and maybe more towards the middle of next year if I were to attempt to pay some of these debts.
Not sure what the negatives are of not paying the full amounts due on my credit cards between now and then, or anything on some of them. I am sure some creditors may take additional collection steps before that time.

Message 10 of 27
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