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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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My husband and I are considering

Customer Question

My husband and I are considering chapter 7 bankruptcy. I am under 65 and disabled. We have two children, 12 and 20. The 20 year old is a dependent student who attends online school and acts as my caregiver while my husband works full-time. Our 20 year old has a $400 month income and routinely deposits that money into our account. We live paycheck to paycheck. To make things easier, since September 2012, he has used his BOA credit card to pay for family groceries and gas. He has no access to our checking account, so it has made things easier. When my husband receives his paycheck (2 times monthly) and my SSDI check we make payments on the BOA credit card to pay for the groceries and gas. This well exceeds $600 per month. Our 20 year old is also on our owner financed home mortgage and sometimes he will pay the note and then we will reimburse the money when we get our checks. We never thought this to be an issue since he was a dependent and we are not borrowing the money, just trying to live from check to check. Will this money paid to his BOA credit card and transferred to him (not regularly) be considered preferential payments? Should we stop this now and wait for 90 days to file or will we have to wait 1 year? We can prove that he did not benefit from any monies paid and we do support him 100%. Also, do we have to claim his $400 income and do we have to claim my SSDI? Do we have to list his bank account (our names are XXXXX XXXXX it)? We live in Northern CA and we cannot afford an attorney, so we have to file ourselves.

Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 1 year ago.

cfortunato :

Hi - my name is XXXXX XXXXX I'm a Bankruptcy attorney here to assist you.

cfortunato :

When a Bankruptcy is filed, the Bankruptcy trustee views all facts in the light least favorable to the Bankruptcy filer(s).

cfortunato :

Although it is true that you have been making your payments directly to the credit card company, and even if payments were made directly to your son, who then paid the credit card company, this payment will not be viewed as a payment to the credit card company, as this is not your debt.

cfortunato :

It is your son's debt.

cfortunato :

This also means that the "lookback" period will be one year, not 90 days, as your son is an "insider".

cfortunato :

1) So, yes, it would be a good idea to stop making credit card payments before filing, as the trustee can take back ("avoid") any amount over $600 paid in the one year immediately preceding the Bankruptcy filing.

cfortunato :

As any payment to the credit card company that exceeds $600 total (not $600 per month) in the one year preceding a Bankruptcy filing will be viewed as a preference.

cfortunato :

2) a) If you include your son as part of your household, then you will have to include his income also.

cfortunato :

To determine whether or not your income is low enough to file a Chapter 7 Bankruptcy.

cfortunato :

b) However, SSDI income is not included to determine whether or not your income is low enough to file a Chapter 7 Bankruptcy.

cfortunato :

3) Unless your son's account has money in it that belongs to you, you would not include your son's bank account in your Bankruptcy paperwork.

Customer :

I am confused as to why our dependent son would be an insider, especially given the fact that we have to claim his $400 income. When we do make a cash transfer to him it is because we did not need to use his $400 that month. He graciously deposits his $400 into our account in case we need it. We only make the transfer from our account to his because it is his money in the first place and if he needs his check then we transfer it back to him.. For example, we have made the following transfers to him over the last year: March '12 - 300.00, May '12 - 240.00, June '12 - 275.00, July '12 - 150.00, Sept.'12 - 600.00. Feb. '13 - 350.00.

Customer :

As for using his BOA credit card. Again, he is a dependent and we provide almost 100% of his support. He uses his credit card to purchase our groceries and gas because we are living paycheck to paycheck. Since, December 12' this is what we have charged on his card for groceries and fuel and what we paid his credit card company. 12/4/12 - 183.86; 1/3/13 - 400.00; 1/31/13 - 600.00; 2/15/13 - 790.59; 2/28/13 - 550.00; 3/1/13 - 251.76. Had he not used his card, we would not have had enough money to purchase groceries before our next check. Can this not be looked favorably upon by the trustee since it was for groceries and fuel, not luxuries.

Customer :

By the way, it is not allowing me to give you a rating because it is saying you have not finished answering my question.

Expert:  cfortunato replied 1 year ago.
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