The money in your bank account on the day you file belongs to your bankruptcy estate. In the eyes of the law, the money in the bank is yours, even if you have written checks that have not yet cleared the bank. *The money from Pending Payments or uncleared checks is considered when calculating your bank balance!
A bankruptcy trustee can demand that you pay her that balance for the benefit of your creditors, even though you may have written the check several days earlier. So make sure that you don’t have any outstanding checks on the day of filing!
$600 / $300 bank balance
Currently in Arizona, on the day of your bankruptcy filing, there cannot be more than $600 if you are married or $300 if you are single in your bank account.
If you have more than the permitted $600 / $300 you will be required to turn the different over to the bankruptcy trustee. For example, if you are single and have $2,000 in your bank account on the day of filing, then you must turn over $1,700 to the bankruptcy trustee.
If you are married and have $2,000 in your bank account on the day of filing then you must turn $1,400 over to the bankruptcy trustee.
We work very hard to coordinate with our clients to make sure there are not excessive funds in their bank accounts on the day of filing.
legitimate ways to reduce bank balance
Some clients ask, “well, if I can’t have more than $300 in my bank account then I’ll just withdraw all of the money from my account and then I won’t have to worry about having too much money in my bank account”. This is not a viable solution because we must list all of your cash as well.
Don’t withdraw cash from your bank account and think you are outsmarting the system! There are legitimate things you can do with the money to bring down your bank account. See below for a non-exhaustive list of things you can do with your money.
- Food Storage– A debtor can have up to 6 month food storage. Obviously things like milk will not stay good for 6 months but there are many food stuff that will. For example, cereal, pasta, cake mix, sugar, wheat, frozen meals, meats, etc.
- Miscellaneous– Laundry detergent, laundry softener, dish washer soap.
- Car Repairs– Like many people, you may have been putting off necessary car repairs/maintenance. You can replace a windshield, buy new tires, replace worn brakes, change the oil, or any other necessary repairs.
- Vehicle Registration- Is it time to renew your vehicle’s registration?
- Health Care– Have you been putting off a medical procedure because you could not afford the deductible? Or do you just need to visit the doctor? Or to refill your prescriptions.
- Dental Care– Do you have a crown that needs replacing? Or has it been a while since you’ve had a teeth cleaning? Do you or a child need braces?
- Brings Outstanding Bills Current– You can bring your mortgage, rent, car payment, insurance premiums, etc.
- Home Maintenance– Could fix a broken faucet or toilet.
- Appliances– Replace aging or broken appliances like a fridge, washer, or dryer.
- Children– Outfits for school, shoes, school supplies.
- Medical, Dental, Braces- Do they need any of these things?
- Attorneys’ Fees and Court Costs– Spending the money on attorney’s fees is a great use of your money!
mistakes to avoid
What You Should Not Do With Your Money Prior to Filing Bankruptcy:
- Payback family members or friends: Do not payback family members or friends. This is giving preferential treatment to one creditor over another and the bankruptcy trustee can ask that the family member turn the money over to the bankruptcy court.
- Do NOT Buy Assets: This may seem obvious but do not take money from a bank account and use it to buy another asset like; cryptocurrency, coins, gold, stocks, or any other type of asset. Also, do not purchase gift cards, these are treated the same as cash.
reasonableness standard
As you can see, there are many ways to wisely spend your money before filing bankruptcy. However, the overarching key to remember is “reasonableness”. Everything is looked at with a reasonableness standard.
If you need help from an Arizona bankruptcy attorney, then contact the Dunaway Law Group at 480-389-6529 or message us HERE.
These blog posts are not intended nor shall it be deemed to be the rendering of legal advice. Additionally, reading these blog posts does not create an attorney-client relationship, nor shall it impose an obligation on the part of the attorney to respond to further inquiry.