There are several rules you have to be careful to follow when you are giving or receiving gifts before filing your bankruptcy case. You must disclose any gifts over $600 to any one person two years prior to filing your bankruptcy case. For that reason, it is best to keep the gift giving to a minimum to avoid having to pay the trustee.
You may give towards charitable contributions such as your church up to 10% of your income. It is fine to receive monetary gifts. For example, if your uncle gives you two thousand dollars to help you pay bills, you can that use money on reasonable living expenses without it being a problem.
If you receive regular financial contributions on a monthly basis, that money might have to be considered as income for the purpose of determining your eligibility for a Chapter 7.
I would recommend consulting with an attorney prior to receiving a gift that would be considered an asset like a car. For example, say your parents buy you a $10,000 car that is now titled in your name. That asset would not be fully exempt and that might require you to pay the trustee several thousand dollars.
That could have been avoided by keeping the car in your parent’s name. Do not transfer property out of your name to avoid paying the trustee because any transfers of property would still need to be disclosed for up to two years.
We generally recommend not making any property transfers before filing your case if you can avoid it or definitely get advice prior to doing so.
When you file your case both a bankruptcy trustee and a judge are assigned to your case. Their roles are very different. The person with whom you’ll have your 341 hearing is actually the bankruptcy trustee not the judge.
The trustee is usually either an attorney or a certified public accountant that reviews your case and administers any assets to your creditors. For example if you are over the exemption amount by $1,500, you would pay that $1,500 to the Chapter 7 trustee and out of that $1,500 the trustee would collect a fee and they would distribute a pro rata share to any creditors who file claims in your case.
The trustee can also collect any insider payments in the past year (any money that you have repaid to friends or family members) or any gifts over $600 to any one person in the last two years. Its very important for your attorney to thoroughly review all of your bank statements and information to make sure there are no unforeseen issues on what you might have to pay the trustee.
That is also why it’s very critical to tell your attorney 100% of information so you can get proper advice on whether it’s in your best interest to file you case or whether it might be beneficial to wait to file your case. The trustee is objective is to find money to pay your creditors.
Although, creditors may also hire their own attorney to represent their interests. The judge is there to make rulings if there is a dispute between you and the trustee in terms of value of property or any other issue that may arise. In most cases there are no assets to distribute, but the trustee files the appropriate paperwork and the judge orders the discharge of your case.