tax return question

[aoccc]

What is the name of your state? IL

Planning on filing 7 after I receive my tax return money. My question is will it be a big deal if I use it to pay select creditors back or will they want it back if I spend it on them. I don't want them to want it back if all I did was pay creditors and now I am screwed. Or should I even spend it on creditors, Will it matter? Thanks.

 

[kwalla]

Here is what I was told by my laywer.

Any payments to creditors prior to filing bankruptcy (60 days?) could be considered "preferential payments". In my case, I had made my normal payments to all my creditors until the month that I filed. The trustee saw no problem with that.

I think what will raise flags is when you made a substantial payment to one of those creditors. For example, paying your uncle back his loan right before filing. In that case, they could come after your uncle for the money. This is just an example.

Honestly, if you know you are going to file after you receive your return. Why not spend the money on living expenses, mortgage/car payments, and those type of things. Save all your receipts so you can prove where the money was spent. If you know you are filing, then paying the creditors will not benefit you.

Just my two cents. Take care and Good Luck.

 

[planner]

You have to report all payments over $600 made; within 90 days and all within 1 year to insiders.

Its up to the trustee to try and get the money back. Contribute the money to an IRA or other exempt asset.

 

[aoccc]

so basically your telling me if i pay off too much debt to one company I become a target but instead I could blow it all on something exempt and they wouldnt have a problem with that?

 

[planner]

It's perfectly legal to do some bankruptcy planning. It all depends on the trustee.

Why do you think Ken Lay, sold all his non-exempt assets?