Can I Create a Wage Account to Keep the Trustee from Taking My Money?

14 Feb Can I Create a Wage Account to Keep the Trustee from Taking My Money?

WARNING – The author of this post is a Florida bankruptcy lawyer. The success of this strategy depends upon whether your state offers a similar wage exemption. If you are contemplating the filing of a bankruptcy, you should ask your local bankruptcy attorney about wage accounts. Because this and other strategies require months of pre-bankruptcy planning, it is important to consult with a lawyer as soon as you consider bankruptcy as a possible option. Since you are browsing this site, you are ready to explore bankruptcy with an attorney now!

Under Florida law, wages are exempt for a period of six months. This means wages in the debtor’s possession which are less than six months old on the date of filing are exempt. HOWEVER, those wages must be identifiable, which means “the money” cannot be commingled or “mixed” with other types of money.

EXAMPLE: Cindy owes $125,000 in old medical bills and credit cards, but she recently inherited a sum total of $7,500 from her long-lost aunt. She earns $25,000 per year from employment. If she files bankruptcy today, she will have to turn over the $7,500 to the bankruptcy estate for disbursement to her creditors, after the trustee’s 25% commission.

STRATEGY: Cindy can go to her bank and open a brand new account. She will only deposit her paychecks into that “wage account” NOTHING ELSE. She can “live on” the $7,500 inheritance, using it to pay ordinary expenses until the money is gone. She then files a Chapter 7 bankruptcy, and all the money that has been in her wage account less than six months is protected from creditors and claims of the bankruptcy estate. If necessary, Cindy can use the funds in the wage account, but remember, ONLY her paycheck can go into that account.

See our all our posts on Protecting Assets in Bankruptcy.

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Chip Parker is the managing partner of Parker & DuFresne, P.A., where he represents Northeast Florida businesses and consumers facing bankruptcy, and homeowners facing foreclosure. His firm files more homeowners in the Mortgage Modification Mediation Program than any other law firm in Northeast Florida. Parker is the recipient of Jacksonville Area Legal Aid's prestigious Award for Outstanding Pro Bono Service. Mr. Parker is an active member of the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.
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