Closing our case?

[wendichris]

Hi all-
First I want to say what a absolute blessing this forum has been!!! We filed for Chapter 7 on October 10, 05. Had our meeting of creditors on December 10. The trustee didn't give us any trouble about our filing but did mention our tax return. Last year we got almost 5000 dollars back due to my husband being able to claim the hope credit. This year I have not been working due to a chronic illness and we are not able to utlize the Hope credit...The trustee stated that we need to send copies of the tax returns and do NOT efile. Our last day for objections to discharge was 2/10/06 (which hasn't updated on Pacer yet but sounds like due to system backups is not unusual!).

My husband did our returns and this year we will be receiving 1700 dollars back on the return (a whole lot less than the trustee expected us to get back LOL Is it wrong that this gives me a little thrill?) The returns have been forwarded to the office and according to Pacer the last day to file a proof of claim from any money recovered from our taxes is March 20).

My question is (thanks for bearing with me this long!!!) is when should I expect our case to be closed? When I left my job I was a member in a Public Employees Retirment System and have a 8000 dollar balance in my account. I have to decide what to do with this balance soon and we had thought about pulling the money out to use as a emergency fund. I however, don't want to risk losing it to the trustee! I'm just wondering if I can expect all this to be done when our trustee gets what he wants. I noticed a report by the trustee on pacer that he had no interest in any of our other assests and was waiting to receive our tax return.

Thanks so much!

Wendi - who really just wants to move on with her life and get this over with!

[AAAArt]

Make sure that you are FULLY aware of all the tax ramifications of withdrawing that money. You will at the least have $8000 of extra income and possibly extra penalties. You could wind up paying up to 40%+ of that back to the govt. (fed and state). Usually you will have already spent it and maay have to make an installment agreement w/ the IRS and state and pay their horrendous interest and penalties.
In addition, it is seldom, if ever, a good idea to spend your retirement account monies before you retire (it comes quicker than you expect).
Don't mean to burst your bubble, but what you are considering is often worse than any credit card interest you can imagine.
Best wishes, Art

[Minnymouth]

A word of caution:::

Make sure your case is discharged and closed before you touch this retirement fund.
Best suggestion I can give you is roll it over into an IRA or just leave it where it is....till you retire. Keep it for EMERGENCY ONLY......

You don't want the trustee to be in a position where its cash and he can get ahold of it...... and you sure don't want the heavy taxes and withdrawl penalties/taxes that would come out of it if you withdraw it right now..
If you withdraw it for cash, you will be penalized and taxed for up to 33% of it.... maybe more... by the time they tack on fees etc....

Check into it, what you would loose by withdrawing now as compared to rolling into an IRA for the future....

I'm sure the idea of having some excess cash right now LOOKS GOOD - but compared to what you would loose to get it - puts everything into a new spotlight to look at!!

Also, you case my close soon, but the Trustee can reopen it up to one year by petitioning the court if he finds assets he can take. So be careful..

Good luck,

[dweebolina]

Whatever you do, DO NOT take from your retirment fund !!!! We cashed in mine (it was about the same amount and prior to filing) and didn't tell our attorney until after!! We may have to replace all that money and our attorney was furious with us that we didn't talk to him first, regardless of why we needed the money!!! That money is exempt and safe in your retirement account!!! Obviously people who file BK are in dire need of money and and I completely understand that, but they don't and they (the trustee) work for the creditiors to get them paid back what they can.

I wouldn't chance it again nor would I advise someone else to chance it. I am expecting to pay a high penalty (probably will have it repayed through our refund when we file) and I am not looking forward to it. The money looked good at the time and helped alot but we don't know what the trustee will say at our 341 this week. It was a BAD move on our part so please rethink withdrawing it!!!

[wendichris]

Hi all-
Thank you for your suggestions and opinions. I am unfortunately "required" to either pull this money out in the next 6 months or try to roll it over into an IRA. I am no longer working due to a chronic illness and OPERS is giving me that amount of time to figure out what to do with the money. I would love to just leave it there but I wasn't given that option. Currently, we have a Roth IRA, which unfortunatly Ohio PERS will not let us roll the retirement money into. I did consult with the OPERS about my tax liability on this and they stated that 20 % of the money (for tax liability) will be taken off the top before any refund. I understand that there will be penalties if we decide to apply for a refund of the money, which is definately something to weigh heavily on our decision.

I consulted with my attorney about the matter and he stated that I should leave the money in the account and not do anything until the case is closed. He said that he didn't see any issues with withdrawing the money once my case has been closed. If we were not raising any red flags with the trustee (no assets beside our tax return for this year and a very uncomplicated case)
I'm just curious as to what would make the trustee decide to look at our case again? I really do appreciate all of your opinions and your wealth of knowledge. I will most definately not procede with withdrawing the money at this point, since it is truly not safe to do so. That money looks especially good for us right now, because I am unable to be employed at this point due to my illness (it's why we had to file bankruptcy in the first place) so it almost seems worth it to me to lose some of the money to the IRS but still have a nice cushion for emergencies.

Thanks again for all your thoughts and posts! I appreciate them and will definatly think before I leap!!!

BTW our discharge posted on PACER today!!!! YEAHHHHH!!! What a great Valentine's Day present.

-Wendi

[Minnymouth]

Wendi,

If you are now discharged and just waiting on closing - DO NOT ROCK THE BOAT!!!!! Your attorney is right!!!

Roll the funds over into another IRA account for the time being....... Try your best to live without it and tighten you belt, cut corners, and make it till your case is closed for at least one year.

You may realize by then that you really didn't need to use it anyways.....

You sure don't want to put yourself in a position where the Trustee can reopen your case and grab every dime of it!!!!

AN OUNCE OF PREVENTION!!!!!!!!!!!