Think you’ve got too much cash to file for bankruptcy?

You think I’m kidding, right? No one with a big pile of cash needs to file for bankruptcy, right?

Well, not so fast. Just one example is very topical now, around April 15th; some folks are getting big tax refunds. Not big enough to pay off all the debts, mind you, but big enough that they think they could put them to better use than a bankruptcy court trustee.

If you do have a sizable chunk of cash (or money in the bank, which is essentially the same thing), the important thing to know is that you aren’t automatically disqualified from filing a bankruptcy case.

First, for those debtors who are able to use the federal list of bankruptcy exemptions, you may have nearly $12,000 in wild-card exemptions to use, and you can apply this sum to your nest egg if you so desire. In Massachusetts and New Hampshire, the people who are eligible for this releif are typically renters, or homeowners who are definitely “underwater” on a mortgage.

And if you don’t qualify for that exemption (or have a lot more than $12K on hand), California attorney Cathy Moran has put together an idea list of how to spend it on things that will be exempt from attachment if you file a bankruptcy case. Her suggestions include:

* Fund IRA’s
* Obtain cash value life insurance up to exemption limit
* Repay 401(k) loans
* Prepay home or auto insurance
* Catch up on tax under-withholding
* Get needed medical or dental treatment
* Repair the things the client has
* Tune-up car
* Stock pantry & freezer
* Pay down student loans, delinquent support, priority taxes.

And while you’re at it, don’t forget to pay your friendly bankruptcy attorney!


By Doug Beaton

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