After Bankruptcy: Why did Bank of America Forgive My Second Mortgage?
What’s going on?
What’s going on?
Planning to file bankruptcy? You will need to round up bank statements. You’ll need them at the beginning of the bankruptcy process; and you’ll need them again for your bankruptcy hearing.
(Here are specific instructions on what bank statements you need for your bankruptcy hearing in Alexandria, Virginia.)
Since you need to tell the bankruptcy court about all your accounts when you file your bankruptcy papers, you want to talk them over with your lawyer early–in time to identify and fix any problems.
Does that include the account with only five dollars that you never use any more? Yes.
Does that include your mother’s account that she “just put your name on in case of emergency”? Yes.
Does that include the account where only your wife’s paycheck goes, but is in both names? Yes.
Does this includes credit unions, too? Yes.
Does it includes accounts you have with your minor children? Yes. And also college savings plans you have for them.
Does it includes money markets? And investment, brokerage accounts? Yes and yes. And Bitcoins; and Paypal accounts. And accounts you have overseas.
More than just banks, it includes every place you have money.
When you first talk to your lawyer, you need to talk about all those accounts. So bring bank statements–and other accounts–with you.
Is your mother’s $200,000 life savings–in the account you are on “for emergencies”–going to be a problem? You want to talk that over when you first meet with your lawyer. Do not wait and bring it up when you are signing the final draft of your bankruptcy papers.
The same thing with your wife’s account that’s “in both names.”
When you bring in the bank statements, then you are not guessing. You and your lawyer can see whether, and how, your name is listed on each account. And how much money goes through it every month.
Both of those can be important to getting your bankruptcy approved–without having the bankruptcy trustee take some of your money. (Or worse, take some money that’s not yours–that belongs to someone else in the family.)
Getting through bankruptcy, without losing any money, may take some planning. Your lawyer may have your wife change her direct deposit to a different account–one only in her name. Your lawyer may want mom to take all the money out and put it in a different account. Maybe the lawyer will just want proof of where mom got all that money.
Besides the bankruptcy trustee maybe grabbing those accounts, some of your creditors might try to get to them. Your lawyer will want to compare your accounts with your creditors–and may suggest you change banks for that reason.
All that takes time and planning–so make sure you bring in all those bank and other account statements at the beginning.
Toward the end of the bankruptcy process, you are required to show those statements to your bankruptcy trustee. What statements? Every one that your name is on.
Those will mostly be the same accounts that you went over with your lawyer at the beginning, but maybe with some changes. If you have accounts that you don’t use, your lawyer may have told you to close them. If your accounts were in a bank where they weren’t safe, you may have new accounts now.
The bankruptcy trustee is looking at your account statements for two reasons. First, because the law (Bankruptcy Rule 4002) requires it. Second, to see if you had too much money on the day you filed your bankruptcy case. (“Too much money” meaning enough that the bankruptcy trustee can grab some of it.)
Sometimes getting those bank statements is a problem, if you wait until after your case is filed. Some banks, and especially some credit unions, stop sending statements when they get notice of the bankruptcy. And they may cut off your internet access, too.
(Stopping the statements and cutting off internet access is most likely a problem if you owe money to that bank. They don’t want to be violating the bankruptcy law by trying to collect your old debts, so they just stop sending you ANYTHING.)
I recommend a two step process. First, when you come in for your court preparation appointment, bring your most recent bank statements. Those may be a few days, or even a few weeks old.
Then, the day after your bankruptcy case is filed and your papers go down to the court, get an internet print out from the end date of the last statement on through to the day after your bankruptcy is filed. Take care of that right away–in case the banks and credit unions cut off your internet access when they get notice of the bankruptcy.
Taking care of bank statements–and all account statements–both early and late in the bankruptcy process, is a key to have your bankruptcy case go smoothly.
Filed a bankruptcy case for some folks last week who had SIXTEEN bank accounts. Half of them they hadn’t used in years, but kept open because it was too much trouble to close them. Now they are trying to get account statements showing the date the bankruptcy was filed, and the bank is not cooperating.
Duh–if you’ve left a three dollar balance on a bank account for four years, the bank is NOT going to consider you a good customer. And if you thought it was too much trouble to close those accounts before you file bankruptcy, see how much trouble it is to get that bank statement balance now that you have filed bankruptcy.
You need to do yourself–and the bank–and the bankruptcy court a favor and close accounts you are not actively using.
So, I’m starting to charge. I’m charging for the extra paperwork we have when people have multiple, unnecessary bank accounts.
For a single person, your first THREE bank accounts are free. If you have more than THREE! accounts on the day you file bankruptcy, there’s a $50.00 charge.
For a married couple the first five are FREE. After five, there’s a fifty dollar charge.
(You also get one more for free for each child you have.)
Each bank account you have means a lot of work–for you, for me, for the bankruptcy trustee. And the more you have, the harder it is–for you, me. and the bankruptcy trustee–to make sure they are all covered. So, close ’em.
If it’s too much trouble to close them, I’m charging for the extra paperwork on my end. You will still have to do extra work to get each statement balance. And if you get sent home from your hearing because the trustee thinks you missed one statement, you were warned.
So, close those accounts you’re not using.
The 2005 bankruptcy law is unfair to families. If you have children, you need to fill out your bankruptcy means test budget very carefully. Here’s why.
The means test in the 2005 bankruptcy law is easy on singles, and hard on big families. Here’s an example: a household of one is allowed $300 for food. A family of four is allowed $757. That’s ten dollars a day to feed the first person in the family–$5.07 a day each for the next three. (When you go above four, it drops to $4.80.)
Congress set this up so that just trying to take care of your kids is called bankruptcy “abuse.”
There’s not much we can do about the unfairness of what the bankruptcy law allows for food and clothing. But, other things you spend money on for your children, you are allowed to claim your real cost.
Those are the areas where you need to focus when you fill in your bankruptcy means test budget.
Child care. Most families pay for child care by the week. And then multiply by four to calculate the monthly. But you should multiply by 4.333. Because there are more than twenty eight days in a month–usually thirty or thirty one. So don’t short yourself. Budgeting those extra three days could be the difference between having your bankruptcy approved and having it turned down.
Besides pre-school or after school care, budget for baby-sitting. Most families, maybe once a month, both mom and dad have to go somewhere, together, and you need a sitter. That twenty bucks or so goes in your bankruptcy means test budget, too.
Do you send the kids to summer camp? That’s child care–and goes into your child care budget.
Are the kids lagging in school? Let’s make sure we take advantage of that. (In bankruptcy everything is upside down–bad is good; good is bad.) So having trouble in school is an advantage in bankruptcy.
You are allowed to budget $125 per month to pay for schooling. Now if the kids are in full time private school, at $125 a month doesn’t begin to cover it. But if the children need tutoring to get through a tough class–or need to pay for summer school to catch up–that could be that $125 per month you are allowed in your bankruptcy budget.
(This schooling budget only covers kids up through age 17. Congress says they are on their own for college.)
Are the kids having big trouble in school? If the children are “challenged,” then the $125 per month cap doesn’t apply. Your bankruptcy budget for education for employment of physically or mentally challenged children is unlimited. (And goes past age 18, too.)
I see some parents who put their kids in private school because they couldn’t handle the public schools. In that case, you can claim that whole expense.
Health and medical. The bankruptcy means test allows you $60 per person for health and medical expenses. Most people think they spend a lot less–but actually spend a lot more.
A lot of what you think of as grocery money can actually be counted at health care. And for healthcare, unlike groceries, you can claim above the allowance.
Let’s start at Walgreens or CVS. Vitamins–that’s health care. Tylenol, allergy medication–health care. Shampoo and toothpaste goes in the grocery budget–but anything stronger is health care. Does your dentist recommend Listerine–that’s healthcare.
Lots of families are spending $20 or more per person on over-the-counter stuff that you can claim in your health care budget.
Prescriptions. Should be obvious, but don’t leave it out.
Glasses or contacts. According to the Vision Council of America, approximately 75% of adults use some sort of vision correction. I’m spending over four hundred dollars a year–thirty five dollars a month–on glasses. Your children may be spending more–because they lose or break them.
The dentist. Just routine dental check ups can cost a couple hundred dollars a year. Maybe half the people I talk to about bankruptcy tell me they are avoiding the dentist because they can’t afford what it will cost. Budget that in.
You are allowed to claim the dental work you’ve been putting off as health care.
Runny noses and broken arms. In addition to preventive care, children (and adults) catch cold and flu, break their arms, and end up at the doctor’s one way or another. Allow something for the unexpected in your bankruptcy health care budget.
Mental health. A Gallup-Healthways Well-Being Index survey conducted in 2009 revealed that about 40 million American adults had recently been diagnosed with depression.
When life knocks you down, there can be changes in the chemistry of your brain. People need help–counselling or medications or both–to get back to their right mind. Things that caused your financial problems–unemployment, break-ups, other health problems–can also bring on depression.
If depression is impacting your family, be sure to add that to your health care budget. (And be sure to take care of it, too.)
Don’t forget these categories
Charitable giving. Most people have a good handle on what they give to their church, their favorite cause, or other regular commitment.
But if you have children (or even if you don’t), you get hit for donations for Girl Scout cookies, the high school band, and that kind of thing. I’m guessing most families spend at ten dollars a month on these neighbor-to-neighbor charities.
Elderlies. Along with the family in your home, many of us are helping out parents or grandparents. One of the very few good changes in the 2005 bankruptcy law, help for elderly (or disabled) family members is now expressly ok. (This includes family overseas.)
To get your bankruptcy approved, we need to show the court where you need to spend your money. People who come to talk to me about bankruptcy have been living from paycheck to paycheck–usually for a long time. But they are often so stressed, they really don’t know where the money has been going.
I hope this article helps you think clearly about your budget–so we can get your bankruptcy approved.