Don't Withdraw That Paycheck And Don't Commingle Your Funds
As a bankruptcy attorney in Southwest Florida, many times I see clients who think it is best to withdraw all their money from their bank accounts before filing. This is an incorrect assumption for a couple reasons: (1) any amounts held in cash must be disclosed; and (2) exemptions may apply to protect those funds while in the bank account.
The first reason is a matter of honesty. Remember, bankruptcy is intended to honest debtors a fresh start. Withdrawing your funds and placing them under the mattress or in a cookie jar does not protect it from bankruptcy as it is an asset and good faith requires that it be disclosed. Additionally, the eyes of the bankruptcy trustee are quite sharp and, as we are dealing with money, there is almost always a paper trail and the risk of losing a discharge or worse, criminal charges is not worth the risk – disclose, disclose, disclose.
You may actually be harming yourself by withdrawing the funds. For instance, in Florida, if the funds come from your earnings, all or a portion of the funds are in most instances protectable while in the account. When the funds in the account are traceable to wages, usually at least 75% of the account can be protected. In some instances 100% can be protected. Whether or not all or only a portion can be protected depends on whether the earnings are from the head of household and the amount the earner makes per week. Currently the dividing line is $500 per week or less for 100% but that amount will be raised to $750 in October, 2010 pursuant to a recent amendment.
To protect the funds they must be traceable, i.e. an accounting on the bank statements clearly shows the funds are earnings. Therefore, all other funds received such as gifts, rental income, etc. should be placed into a separate account or simply kept as cash – which we know must be disclosed.
This Blog was written by Attorney David Fineman, Esq. of The Dellutri Law Group, P.A. Mr. Fineman practices Bankruptcy Law, Fair Credit Reporting Act Law, Fair Debt Collection Practices Act Law and in other areas of Consumer Law.
