401K Withdrawl @ 341

[keepmine]

What I don't understand from this discussion is why would the TT even care what you did with your 401 or IRA once the 341 is over and you are already bankrupt. Those funds couldn't be used prior to filing as they would for many have put them over the median, now you are past the 6 month look back and poor as dirt while this game is being played out and you have to wait? I think in the end if it comes down to a roof over your head and food , you have to do what ever it takes to survive. I was told the only thing they are interested in after the filing is inheritances and life insurance up to 6 months.

Not sure why this is so hard.
You are taking assets that are exempt {4o1K} and turning it into cash that is not exempt. Plus, the value of the cars the OP wants to buy may be beyond what there state exempts. Again, you've taken assets that were exempt and placed them in assets that are not exempy. Until your bk is discharged and closed, you are still under the trustees control
Nobody is saying you can't do it. Just, if you get caught the downside is signficant.

[LALADY]

I am sure someone will correct me if I am wrong, but:

1) I think it is important to note that the trustee is not concerned about you or your welfare before, after or during a Chapter 7. They are ONLY concerned with the creditors you owe.

2) While in BK, everything you own (including that which you think may be exempt) and everything you owe is part of the BK estate and under the control of the trustee until the BK has been discharged.

[albacore44]

The trustees regularly run asset reports as part of their discovery. If two cars suddenly show up in an asset report, then the trustee will go after them. Cars have to be licensed, registered, etc and trustee's run reports to find such assets. My trustee checked the balances of all my retirement accounts to see if I withdrew anything. If I had withdrawn anything, then that money would have been attachable by him.

To convert exempt assets to non-exempt assets before discharge is very risky. You may get away with it, but if the trustee runs a report and finds assets not listed or exempt, that will be a red flag and could end up costing you money and even a discharge.

true, but if you moved the money around after you filing date, and they discovered it came from your 401k, its not an issue, because its after your filing date. i asked my attorney specifically that question, and that is what he told me. Also once your past your 341 and the trustee files his report of no distribution, he's done with you.

[backtoschool]

true, but if you moved the money around after you filing date, and they discovered it came from your 401k, its not an issue, because its after your filing date. i asked my attorney specifically that question, and that is what he told me. Also once your past your 341 and the trustee files his report of no distribution, he's done with you.

I am more concerned about the OP having 20k in available exemptions to cover the cars. Trustees regularly run asset checks and the date for the trustee to object to exemptions is way after the 341.

[LSUTiger32]

Why take $20K out to buy two cars? You can get two cars a lot cheaper than that and you are going to pay a 10% penalty plus 25-35% in taxes. You might as well go to a payday lender and let them charge you 400%.

[waldo22]

We plan on spending about 12K for two cars and then using the other 8K for Auto sales tax, student loans, and to generally live on and get a tiny headstart.

Again we are No asset and w/o vehicles. Just really wonderiing if I take this money buy two cars and pay off some debt would the trustee seek some implications. I would contact my attorney but he failed to show @ my 341 and me and my wife proceeded w/o him. Trustee was very nice and allowed us to since our file/paperwork was very clean.

[tdawg]

different strategy

We plan on spending about 12K for two cars and then using the other 8K for Auto sales tax, student loans, and to generally live on and get a tiny headstart.

Again we are No asset and w/o vehicles. Just really wonderiing if I take this money buy two cars and pay off some debt would the trustee seek some implications. I would contact my attorney but he failed to show @ my 341 and me and my wife proceeded w/o him. Trustee was very nice and allowed us to since our file/paperwork was very clean.

Hey Waldo,

I think this might be a cheapter route to go:
1. Roll your 401k over to a traditional IRA (at any bank, etc.)
2. Roll the traditional IRA over to a Roth IRA (you can do this now without limitations) - you'll owe taxes on the amount you rollover to the Roth IRA, but no 10% penalty
3. Take a withdrawal from your Roth IRA - you can withdrawal as much as you rolled over with no penalty.

Or, another thing to consider: Could you get away with renting a vehicle when you need one? Maybe not, but figured I'd throw that out there. I'm turning my car back in tomorrow and I'm going to use a combination of zipcar+bus+renting a car when I need one until I can purchase a car.

Good luck in whatever you decide! :-)

[JackBondLove]

The trustees regularly run asset reports as part of their discovery. If two cars suddenly show up in an asset report, then the trustee will go after them. Cars have to be licensed, registered, etc and trustee's run reports to find such assets. My trustee checked the balances of all my retirement accounts to see if I withdrew anything. If I had withdrawn anything, then that money would have been attachable by him.

To convert exempt assets to non-exempt assets before discharge is very risky. You may get away with it, but if the trustee runs a report and finds assets not listed or exempt, that will be a red flag and could end up costing you money and even a discharge.

Wrong. The BK estate is set at the date of filing. So long as you can show the transfer of funds from a retirement account to a regular account and then on to whatever you may be purchasing, you're OK.

[JackBondLove]

Why take $20K out to buy two cars? You can get two cars a lot cheaper than that and you are going to pay a 10% penalty plus 25-35% in taxes. You might as well go to a payday lender and let them charge you 400%.

If the OP needs a car, he needs a car. $10K for a car is reasonable expense, as it would be new enough to last a while. The toughest part of BK is simply surviving until the ordeal is over.

[blessed]

Wrong. The BK estate is set at the date of filing. So long as you can show the transfer of funds from a retirement account to a regular account and then on to whatever you may be purchasing, you're OK.

If "the BK estate is set at the date of filing" is the case then they do they ask if someone is sick and will die and leave you money in the next 6 months? Or if you are going to get an inheritance after filing? Or why if you win the lotto in the 6 months post filing are you in danger of dismissal? That doesn't compute.

[backtoschool]

Wrong. The BK estate is set at the date of filing. So long as you can show the transfer of funds from a retirement account to a regular account and then on to whatever you may be purchasing, you're OK.

Wrong. All non-exempt cash and property is part of the bankruptcy estate until discharge.

The trustee can object to exemptions. It is highly unlikely that the OP has 20k in exemptions to cover the cars.

Please see my above posts.

[dakota112]

Wow, who is right and who is wrong here? All I know is one would think that at the 341 meeting if this was such an important issue, the TT would have told one so as well as my atty. All I distinctly being educated upon was send me your tax returns, tax refunds, any life insurance and inheritances 6 months postfiling. Nothing else was mentioned to me anyways. In fact my atty said try to get a job if you can, good luck and just relax and await your discharge letter. I guess the best advice to anyone with these kind of issues is to contact your atty or maybe just call the trustee directly and ask them for advice since it is they who will step in if you misstep.

[LALADY]

IRS double dips on Roth IRA distributions. It's the only tax that the IRS is allowed to double dip on. If you plan on following that advice, read the rules on the IRS website. That, or talk with your CPA first.

[JackBondLove]

Wrong. All non-exempt cash and property is part of the bankruptcy estate until discharge.

The trustee can object to exemptions. It is highly unlikely that the OP has 20k in exemptions to cover the cars.

Please see my above posts.

All non-exempt cash and property that existed PRIOR to the filing is part of the estate. Except for an inheritance, any cash that has been garnered otherwise is not part of the estate (so long as the garnering was not a dodge to have it done prior to the filing as opposed to after.) Any item purchased with such cash would not be part of the estate either. However, an inheritance granted 180 days after a filing would be considered as part of the estate.

[JackBondLove]

Here is a good section from an article about this:

http://www.paulpost.com/services/bankruptcy/estate.html

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Chapters 7 & 11: 11 U.S.C. Sec. 541(a)(1) provides that, with exceptions, all legal or equitable interests of the debtor in property as of the commencement of a case will flow into the bankruptcy estate created by the debtor's bankruptcy filing. Estate property will also include any interest in property that could have been property of the debtor's bankruptcy estate as of the date of filing, when the debtor acquires or becomes entitled to acquire such property within 180 days from the date of filing as a result of a property settlement agreement with the debtor's spouse, or of any interlocutory or a final divorce decree. This can be of particular importance if transfers are made to the debtor of property that my lose its exempt status in the possession of the transferee. This so-called "lookback" rule also applies to the right to receive an inheritance and life insurance. Aside from these limited exceptions, a Chapter 7 or Chapter 11 estate does not include property interests or income acquired by the debtor after the commencement of the bankruptcy case.

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So basically, aside from fraud through "good timing", and inheritance, life insurance or divorce settlement, the filing date denotes the cutoff for the estate.