Bandkruptcy And Roth IRA Questions

Greetings:

I have read that any money that one has saved in a retirement account, such as a Roth IRA, is protected from creditors when filing for Chapter 7 Bankruptcy.

Please correct me if I am wrong on this.

During the past 12 months, due to financial hardship, I wound up having to liquidate my entire retirement savings, most of which was in my Roth IRA.

Right now I have no retirement savings and no Roth IRA. Or if that Roth IRA is still there "on paper", there is no money in it.

I do want to get my Roth IRA going again. To do so, I will have to start small and contribute whatever I can afford each month.

However, my financial circumstances still point to filing for Chapter 7 bankruptcy as a viable solution to my financial problems.

Here are my questions:

Can a person start a Roth IRA, and deposit money into that Roth IRA, the day before filing for Chapter 7 bankrupcy?

How about on the same day as filing for Chapter 7 bankruptcy?

The day after?

In other words, can I do both at or about the same time?

Those are my questions.

Any and all replies will be deeply appreciated.

Thanks in advance.

Dennis

Retirement savings that meet the IRS guidelines are protected under the New BK Law.

But to open a retirement acct shortly before filing and even on filing day would look a little suspect. The Court likes continuity. If you'd have been contributing all along for a period of time prior to filing, that would be one thing.

To suddenly open a Roth IRA when you haven't been paying other Creditors,............. Well I don't know if the Court could do anything, but you certainly wouldn't be making friends with the Trustee. Talk about waving a red flag in front of the bull and screaming "Scrutinze Me!!".

People do many things that are, perhaps legal, prior to filing BK. And then cry foul when the UST's Office intervenes and files for an Extension to review, in depth, a filer's case.

The day you file Ch 7 BK, you set the BK Estate. What happens the next day after that is not the Trustee's concern. Financially speaking that is. You can't go selling off a car, or furniture, or collectibles, assets that were a part of the BK Estate. But you most certainly can open a new savings, and indeed a new Roth IRA the very next day with no problems at all.

One HUGE key to a successful BK filing is to stay below the Court's radar. Opening a new retirement plan so close to filing would not be a good way to stay below the radar.

JMHO.

In short you can. There is no problem converting non-exempt to exempt assets before filing BK.

However, contributions to IRA's do not count as an expense, so you cannot budget it when you do your income and expense statement for your BK petition.

You can put non-exempt assets (cash, in our case) into exempt assets. As long as you do not go overboard buying a fancy Mercedes or something... resonable expenses are legitimate uses of cash. We were told to open retirement accounts, do home improvements, pay taxes, etc, until we exhausted our cash resources THEN file.

I was told to do this by 3 different attorneys.

Best of luck to you!

Retirement savings that meet the IRS guidelines are protected under the New BK Law.

But to open a retirement acct shortly before filing and even on filing day would look a little suspect. The Court likes continuity. If you'd have been contributing all along for a period of time prior to filing, that would be one thing.

To suddenly open a Roth IRA when you haven't been paying other Creditors,............. Well I don't know if the Court could do anything, but you certainly wouldn't be making friends with the Trustee. Talk about waving a red flag in front of the bull and screaming "Scrutinze Me!!".

People do many things that are, perhaps legal, prior to filing BK. And then cry foul when the UST's Office intervenes and files for an Extension to review, in depth, a filer's case.

The day you file Ch 7 BK, you set the BK Estate. What happens the next day after that is not the Trustee's concern. Financially speaking that is. You can't go selling off a car, or furniture, or collectibles, assets that were a part of the BK Estate. But you most certainly can open a new savings, and indeed a new Roth IRA the very next day with no problems at all.

One HUGE key to a successful BK filing is to stay below the Court's radar. Opening a new retirement plan so close to filing would not be a good way to stay below the radar.

JMHO.

This is basically what my attorney said too. She said technically you can do a lot things to protect your asset. But it can result in just too much of an "in your face" thing, and it just doesn't generate goodwill. It may just tick off the trustee, for what it is worth.