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First in, First out accounting – The poker chip analogy

| Jan 25, 2022 | Bankruptcy, Chapter 13, Chapter 7

One of the things that comes up in protecting money in a bank account from creditors, is the concept of first in first out. It’s a concept that is seemingly difficult, yet also quite simple. The first money that goes in, is the first money that goes out. But you don’t have to go back to the beginning of the bank account to do that, you just need to go back as far as the current balance in the account.

This can become crucial when some of the money is exempt, Such as child support, Social Security, or other public assistance, and some of the money is not exempt.

It dawned upon me why people get confused. Imagine you’re playing blackjack, you start out with $100 in chips, and you bet the $100 and win. So now you have $200, and you grab the $100 from the top of your stack and you bet another $100. It’s only natural to think hey, now I have $200, and I  only had $100 when I started here, so now I’m playing with the house’s money. Right? Wrong. Because what first in first out accounting really is, is that you’re taking money off of the bottom of the stack of chips.

This blog post contains general information about a fact pattern that is unique for everybody, and often inapplicable if there is plenty of room to protect all funds. If you are looking for advice to rely and act upon, that’s what we are here for.