Occasionally, a client of mine will have some cash on hand before we file her bankruptcy petition. Maybe she just got her tax refund, or got a bonus.
Unfortunately, in Colorado, there is no exemption in bankruptcy for cash on hand. That means that if you have any cash on hand, including a balance in your checking or savings accounts, at the time your petition is filed, the trustee is going to want some or all of it to pay your creditors.
However, there are some ways to spend that cash that won’t get you into trouble. Here are a few:
- Put it in an IRA
- Stock up your pantry
- Get necessary medical or dental care you’ve been putting off
- Get your car repaired
- Catch up on tax under-withholding
You need to be careful paying any loans that are not going to be discharged in bankruptcy. If you pay more than they are due, they trustee may consider excess payments preferential payments and force the lender to cough up the excess.
If you have any questions about how to spend any excess cash you have, you should talk to a bankruptcy attorney.