401K Withdrawl @ 341

[LSUTiger32]

I consider a car like a VW Jetta to be reasonable. The price of of this car as a 4 year old certified used car would be about $10K. Any lower of a price, and you're getting into a used car that could have some suspect issues. And an old car costs more in maintenance, so the net cost of driving a car gets down to a pretty constant level after some time (I know from experience with my Jetta Wagon that has almost 150K miles!)

I bought a 2000 Ford Taurus for $2,500. I spent $600 for a new set of tires, a front end alignment, and to change the air and fuel filters. That was 14 months and 21,000 miles ago. Not one problem whatsoever and I commute 80 miles a day.

[JackBondLove]

If he needs a car, he does need a car. $10K for a reasonable car? I guess if you are used to driving Ferrari's.

I consider a car like a VW Jetta to be reasonable. The price of of this car as a 4 year old certified used car would be about $10K. Any lower of a price, and you're getting into a used car that could have some suspect issues. And an old car costs more in maintenance, so the net cost of driving a car gets down to a pretty constant level after some time (I know from experience with my Jetta Wagon that has almost 150K miles!)

[DebtHater]

I have about 20K that I need to withdrawl from my 401K to buy 2 vehicles. We surrendered both of our vehicles in the chapter 7 and I plan on taking my 401K money and buying 2 vehicles for cash. Will the trustee get involved with this?

Also I'm not worried about tax implications due to my age being 25, plenty of time to start a new retirement account.

Are you withdrawing 30K because you need 20k? Or, are you with drawing 20K because you need 13K?

Rhetorical question, no need to answer. I just can't see throwing away over 7K for something that depreciates. Furthermore, even though you're 25 and you have "plenty of time to start a new retirement" you will NEVER get back what that money would have brought you at retirement age.

I was 25 once and did stupid things with my 401K. Now at 41 I regret it seeing what I would have had. I truly believe there are other options you are overlooking to get your self a car.

[LSUTiger32]

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.

If he needs a car, he does need a car. $10K for a reasonable car? I guess if you are used to driving Ferrari's.

[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.

[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.

[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.

[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.

[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.

[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.

[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.

[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.

[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! :-)

[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.

[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%.