Had my 341 - Trustee not happy - what would you do?

[gman]

Background:

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- Chapter 7 - No Assets (all exempt)
- Unemployed - 4 months now
- Over median on Means Test (used to make good money, so Means Test showed 3 months of high income and 3 months of near zero income due to unemployment)
- Negative DMI on Means Test (about -$100)
- Negative DMI on Schedule J (about -$4,000)

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I had my 341 today and the trustee asked if there had been any changes to my situation since I filed. Being under oath, I told him that after filing I liquidated my exempt IRA to pay for rent, food, etc.

He told me I had "no right to do that" and I simply replied: "Sorry, I did not know."

He wrote down the amount of the withdrawal in his notes.

These funds are now spent (gone to the landlord, food, utilities, insurance, etc.)

What's done is done - seeking guidance on what to do moving forward (and what to likely expect.) I'm not panicked - just wanting to plan accordingly.
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I figure my worst case is that they flip my case to a presumption of abuse - but I am unsure given my totality of circumstances (remember, I have a HUGE negative DMI on Schedule J) how they would go down that route. Also, I can't see them claiming that the money is "income" on my Means Test because the withdrawal happened AFTER the date of filing.

I am also slightly confused why this was a no-no given my hardship. If I had $5,000 in checking that was exempted on the day I filed, and I spent that money after filing and now had $100, would that be a no-no?

If I had $2,000 worth of household items that were exempted and sold $1,000 on eBay after filing to make ends meet, would that be a no-no?

Seems logically unclear as to why liquidating an exempt IRA after filing to pay the bills is a no-no.

I was thinking on the drive home that I could get a gift from my family and redeposit the money into the IRA as I am within the 60 day limit for a "rollover". COULD THIS SOLVE MY PROBLEM, assuming I even have one?

WHAT ELSE WOULD YOU DO, OR PLAN ON DOING, GIVEN THE CIRCUMSTANCES?
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Note that starting with next month, I am going to have to rely on family anyway to make ends meet unless I generate some income.


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On an unrelated note, I was asked if I had a new job offer. I do not and answered such.

I was also asked why I was paying an amount in rent that was above the local standards. Unsure why this was asked because on my Means Test I put an amount that equaled the local standards (a few hundred less) so it should not mean anything on the Means Test. On Schedule J, my rent could be zero and I'd still be well over -$2,000 in DMI, so I don't see why the question was even material given my case. He did not ask another sole a single expense question.

[tcreegan]

Hi gman!

Well, at least the 341 is over.....keep an eye on PACER to see if the trustee files anything. Hopefully it is a report of no distribution !!

On the rent, he probably just spied a high number and commented on it. If he is going to object to it, I would think he would do the math and see that it makes no difference.

The 401K comment makes no sense to me, if he didn't say anything further it might just be a comment. To do anything about it he would have to invoke 'totality of circumstance' ...a complete hassle for them, I doubt it is worth going after.

Unlike the US Trustee, the BK trustee keeps in mind what is practical and profitable.

Welcome to the 60 day waiting for the trustees report club !!

Tom in Colo

[researchnerd]

Hey gman! Congrats on surviving your 341, and welcome to the 60 Day Club.

I suspect, as Tom said, that the Trustee was just asking questions. Regarding the "you had no right" comment, I think that technically everything you own on the date you file gets becomes property of the Bankruptcy Estate until the Trustee determines what to do with it. Even if you know it's exempt, maybe he's just a control freak and wanted you to wait until he SAYS it's exempt (Report of No Assets/No Distribution) before you use that money.

Not sure whether rolling cash back into your IRA would be a good idea...then they'd want to know where that came from. I'd wait and see what the Trustee's report says before doing anything.

[biotechsolution]

If you have no rent, I'm a little confused how you can negative 2K without bills? What are all the payments?

[tobee43]

evening gman!

you did fine...of course, and we need to remember it's the trustee's job to ask these questions...we were asked as well about a deed transfer within 6 months of the filing date...and frankly, if the trustee didn't ask, she wasn't doing her job...it all went well as i'm sure you're did.

i just KNOW you are in that 60 day club and awaiting your discharge!! glad you're done with the 341! good job!!

[ccsjoe]

Hey gman,

Tom has it right. Just look for that report of no distribution. Doubt if anything will be challenged, not worth their time to do so.

[gman]

I expect a posting by tomorrow, if all goes like it has been in my district, as 2 days is the normal turnaround.

Time will tell. I am totally not sweating it - as worrying would do no good anyway.

Good advice above on NOT taking family cash and putting it back into the IRA until AFTER I hear from the Trustee.

In a weird way - I find the entire process comical. Essentially you need to show up in court penniless (except for a small amount of money) and yet if you liquidate any of your EXEMPTED assets they throw a fit. How do they expect people to eat.

Well - I could have avoided all of this by lying - but I'd rather tell the truth than risk perjury.

I will keep you all posted.

[tobee43]

I expect a posting by tomorrow, if all goes like it has been in my district, as 2 days is the normal turnaround.

Time will tell. I am totally not sweating it - as worrying would do no good anyway.

Good advice above on NOT taking family cash and putting it back into the IRA until AFTER I hear from the Trustee.

In a weird way - I find the entire process comical. Essentially you need to show up in court penniless (except for a small amount of money) and yet if you liquidate any of your EXEMPTED assets they throw a fit. How do they expect people to eat.

Well - I could have avoided all of this by lying - but I'd rather tell the truth than risk perjury.

I will keep you all posted.

please do gman...many of us have been here with you since day one...so for me, personally...i have an investment in your well being...

[gman]

Had my 341 last Wednesday.

On average, the trustee decisions have been posted on PACER within 2 business days.

Friday and today came and went - no posting. Also checked some others who were in the same 341 as me....no update on their cases either.

Hoping tomorrow will be the day!

[tobee43]

Had my 341 last Wednesday.

On average, the trustee decisions have been posted on PACER within 2 business days.

Friday and today came and went - no posting. Also checked some others who were in the same 341 as me....no update on their cases either.

Hoping tomorrow will be the day!

well gman, that's actually good news since no one has been posted either. sometimes they do run behind with their postings...so i'm hoping for certain you should hear by the end of the week ...very latest!

[debee]

I always thought it was a big no-no because it was exempt while sitting in your IRA, but not exempt once you withdrew it. Then it's just cash. And since everything is still part of the "estate", once you withdraw it, it would/should be available to pay your creditors.

After reading this thread just now, I went googlin' and ended up in an archive at this forum where at least one person did this same thing and they were discharged and closed.

edit: i was just reading more about this on avvo & 2/3 of the lawyers who answered said you could withdraw money after filing. 1/3 said wait until after the 341. the risk is that the trustee might have been able to object to the IRA as an exemption.

[tobee43]

I always thought it was a big no-no because it was exempt while sitting in your IRA, but not exempt once you withdrew it. Then it's just cash. And since everything is still part of the "estate", once you withdraw it, it would/should be available to pay your creditors.

After reading this thread just now, I went googlin' and ended up in an archive at this forum where at least one person did this same thing and they were discharged and closed.

edit: i was just reading more about this on avvo & 2/3 of the lawyers who answered said you could withdraw money after filing. 1/3 said wait until after the 341. the risk is that the trustee might have been able to object to the IRA as an exemption.

debee, what do you think the chances would be if gman....if asked, just said or replied...i spent the money on living expenses because i was broke...and here's my rent receipt etc.?

i'm hoping that would work! actually from your excellent research it does some hopeful for gman that everything will be fine...i have my fingers and toes crossed for him!

[debee]

debee, what do you think the chances would be if gman....if asked, just said or replied...i spent the money on living expenses because i was broke...and here's my rent receipt etc.?

I don't know, tobee. I think the trustee is bound by certain rules in terms of protecting the creditor's rights and pretty much follows those.

I thought once it was out of the IRA vault, it was fair game. But now I think I was wrong about that.

If the trustee could not have objected to the IRA (if it was old, or if it was his customary amount, if account wasn't unreasonably large, etc) then I am guessing and hoping that he's in the clear.

edit: I have a lot of reading to do on this topic!

[gman]

Another day ends - and still no update on PACER concerning my case - or any others who had their 341's on the same day.

Strange.

Oh well, putting the champagne back on ice!

[BKlooker]

Since yours was the 10th, that means i believe they only have through this Sunday the 20th (really Friday) and they have to note something as far as intent to bump you into a presumed abuse status....so if you don't have anything noted by then, it won't hurt to give the Trustee's office a (very polite) call and ask what the status of your case is. It may just be a clerical delay, as this isn't uncommon from what I have read. They may already have noted you and everyone else no distribution, just not updated in PACER yet.