Can I return money to my Roth IRA?

[gohornsgo]

I hope to file Chapter 7 during the first week of March. Three months ago I took $5,000 out of my Roth IRA to help with living expenses. I did not need this money and am now hoping to return the funds to my IRA. Is this allowed prior to filing Ch 7? I live in Arizona and must have no more than $150 in my checking account on the day I file, otherwise I risk being an asset case which is bad news! I guess if I cant return the funds I will have to spend the money. I would hate to raise any red flags with the trustee.

[justbroke]

You should really contact an asset protection attorney or bankruptcy attorney licensed in your State. Generally speaking, you can take that money and put it into a retirement account or even pay down a secured debt (like home or car). How that affects your Bankruptcy can vary based on your State and your intentions.

In most cases, it's not a problem. However, if you were hiding the money from creditors, like stuffed it in a mattress, then it could become problematic. I'm assuming from your post that it was in a regular demand deposit account at a bank, so that's not "hiding" it in any manner.

My real concern is that this is not a traditional 401(k), 403(b), or traditional IRA. I don't know the impact of putting the money in the account and what would protect you in Arizona. I do know that Arizona does protect both Roth and traditional IRAs in their entirety. The only question is whether the Trustee would challenge you on whether you were "hiding" the money from creditors. I don't think so if it was in a regular account at your bank.

Wish I had more for you.

[Logan]

If you take principal out of your ROTH IRA you cannot return it. You can put it in for 2010 contribution if you have not contributed yet.

[keepmine]

Be careful here.

http://www.thebankruptcysite.org/exemptions/arizona.html

33-1126 - ERISA-qualified benefits, if deposited more than 120 days before filing. IRAs & Roth IRAs.

[justbroke]

Excellent read keepmine.

[keepmine]

Excellent read keepmine.

Funding an ERISA qualifed IRA is an excellent way to shift non exempt assets to exempt assets.
I did it myself prior to my filing but, while I was in the research stage I found a website that listed the IRA exemptions by state. Unfortunately, the site www.ici.org has removed that info. Or, at least I can't find it.
This was in early 05 prior to bk reform and some states didn't protect Roth's. The bk reform act does protect Roth's but, there are still a few states that don't exempt IRA deposits if they're made within a certain time period frame prior to filing. I do recall Az. and Vt. as 2 such states. Seems there were 1 or 2 more.
I'd just encourage everyone to do their homework before moving cash into IRA's. You may have a timing issue.

[justbroke]

I thought that the new bankruptcy code has a supremacy clause, meaning that it supersedes any State laws on the matter. Again, this is why I refer the poster to seek a qualified attorney in his/her State for these important issues.

[gohornsgo]

Thanks everyone for your input! I dont think I can invest in a roth or 401-k in Arizona. I believe I cant contribute within 120 days of filing.