Cash out of IRA while in 13?

[schism7273]

Hi,
We have a Simple IRA that's losing money fast. We are (hopefully) about to be confirmed if our little disaster (another story) works out.

This IRA is listed in the EXEMPT part of our filing paperwork. If we cash it out will the Trustee take it or is it ours since it was submitted as exempt? I know there are penalties and major taxes so I don't need info on that. I am only looking at if we will get to keep whatever is left over.

Thanks!

[SMinGA]

My understanding is the IRA itself is exempt - not the cash. Taking it out would be like adding extra income, and that increases DMI so it is fair game for your plan.

As always, consult with your atty...

[Flamingo]

Everyone's retirement accounts are losing money. Saving in a retirement account is long term. It will go up and down. If you take that money out, not only are you subject to taxes and penalties but if you do it and don't report it to your attorney, you risk BK dismissal. If I were you, forget you have that account for now and just keep saving in it if you are allowed to.

[schism7273]

So I take it no one really knows for sure. I've already made the decision to take it IF I can. I would of course involve my lawyer and the trustee. I didn't think I had to spell that out. I just want to know if since it was listed as exempt does that mean it won't be taken from me.

I was hoping someone who had actually done it might chime in?

[LadyInTheRed]

So I take it no one really knows for sure. I've already made the decision to take it IF I can. I would of course involve my lawyer and the trustee. I didn't think I had to spell that out. I just want to know if since it was listed as exempt does that mean it won't be taken from me.

I was hoping someone who had actually done it might chime in?

I don't think you are likely to find people here who have done it while in BK. People come here for information to help them make and carry out good financial decisions. Cashing out your IRA because it is currently down in value is a terrible financial decision. We tend to talk people out of it. I bet most people here who cashed out their IRAs did it to pay off debt before filing BK and regretted it once they realized they needed to file and that the IRA is exempt.

I do what Flamingo suggests. When markets are down, I ignore my IRA. I only look at it when things are up. I have 20 years or more until I will retire. A lot will happen in that time.

If you must do something, can't you adjust the investments within the IRA instead of cashing it out?

I know this isn't the kind of response you are looking for. But some of us just can't help but speak up when we think somebody is headed down the wrong path. Please pardon our caring souls.

ETA: Here's one attorney who says you can access your IRA during Chap 13: http://www.avvo.com/legal-answers/ch...an-242931.html

[ssmdem]

It's exempt if it's in the IRA -- I think you're making intnon-exempt by converting it to cash. I would think you've now made it a non-exempt asset, thereby making it fair game to the trustee.

[HHM]

Strictly speaking, you are not supposed to do it because you may increase your liabilities and create a situation where you have new debt (tax debt).

Let me be blunt, DON'T BE AN IDIOT. If its losing money, simply sell whatever investments you are in, but don't actually cash it out. Granted, if we are talking about token amounts, less than $8,000, then it really doesn't matter (but still stupid), but if you have more than $8K in the IRA, you would be an idiot to cash it out and lose even more money.

As for the chapter 13...strictly speaking, the IRA is a non issue. In chapter 13 you can reconcile the value of non-exempt assets. So long as the total of your monthly payments equals the value of non-exempt assets, you can keep those assets.