Is this a bad idea?

[whyme]

My husband and I are thinking about filing for BK. He has an appt. with an attorney on the 25th of this month. Since we are so broke (we have about 100 dollars in the bank and my hubby gets paid Friday), he was thinking about cashing in some of his retirement stocks to get us through the next few months. Maybe cashing in enough to get about 4k for a 1k downpayment on my daughter's braces and enough to pay the attorney fees and have about 1500 for an emergency. What do you think? Would it look bad if we did this?

[backtoschool]

What type of retirement plan is it?

Many retirement plans are exempt in bankruptcy, so you would be converting exempt assets to unexempt assets.

Any transfer of funds done close to filing will have to be back by receipts, etc. and the assets may not be exempt. But if you are paying for necessities it probably won't be a problem.

[sigferl]

Thanks for your post whyme. Sorry to hear about your troubles. I definitely think that selling retirement assets is a good idea to get you through some tough times. Hopefully the recession will not last much longer and you will be able to repay the retirment account.

Freedom is not free.

My husband and I are thinking about filing for BK. He has an appt. with an attorney on the 25th of this month. Since we are so broke (we have about 100 dollars in the bank and my hubby gets paid Friday), he was thinking about cashing in some of his retirement stocks to get us through the next few months. Maybe cashing in enough to get about 4k for a 1k downpayment on my daughter's braces and enough to pay the attorney fees and have about 1500 for an emergency. What do you think? Would it look bad if we did this?

[whyme]

What type of retirement plan is it?

Many retirement plans are exempt in bankruptcy, so you would be converting exempt assets to unexempt assets.

Any transfer of funds done close to filing will have to be back by receipts, etc. and the assets may not be exempt. But if you are paying for necessities it probably won't be a problem.

I'm not really sure about what kind of retirement plan it is. I think it's profit sharing. I don't know...it's stocks that the company my husband works for gives to their employees. He actually only has about 18k worth of stocks and we need to cash some in to pay the lawyer and orthodontist. I would think that's a necessity but I'm not sure how the courts will feel.

[jadams]

Don't do it until you speak to the attorney.

It may be fine. It may cause you to loose the ability to keep those funds from the trustee.

Without knowing more about your assets and your state, it's very had to say...

[mgmadara]

Please speak to an attorney before you do this. Generally it is not a good idea to pull retirement funds because they are usually exempt. Also, once they are cashed in it can count as income on the means test. Other members here have more experience than I do so I am sure you will get some insightful posts. Finally, Sigferl is our resident anti-bankruptcy troll so please take any advice he gives with a grain of salt. Good luck.

[keepmine]

Have you stopped paying all debt you wish to discharge? If not, do so and use that money for legal fees and living expenses.

[whyme]

Have you stopped paying all debt you wish to discharge? If not, do so and use that money for legal fees and living expenses.

Yes. We stopped paying them almost 2 years ago right after I had to quit my job due to a medical condition. Fortunately, we haven't been sued but I'm guessing this is due to a lack of assets.

[whyme]

Please speak to an attorney before you do this. Generally it is not a good idea to pull retirement funds because they are usually exempt. Also, once they are cashed in it can count as income on the means test. Other members here have more experience than I do so I am sure you will get some insightful posts. Finally, Sigferl is our resident anti-bankruptcy troll so please take any advice he gives with a grain of salt. Good luck.

Thanks for the heads up about Sigferl. He needs to understand that bad things happen to good people. In my case...a chronic and sometimes debilitating medical condition, an unexpected 14 month Iraq deployment (hubby) at a very crucial time in our financial situation which caused a significant loss of income, and a very premature child which halted any furthering of MY career or education (to increase our income) for over 7 years. Not everyone is fortunate enough to cruise through life without any problems.

What really irritates me is that you can cheat on your spouse which results in FAILED marriage, FAIL as a parent which could result in serious problems for your children, be completely irresponsible in every other aspect of your life and get a free pass, but if you are a financial failure, it's practically a crime and people automatically form a negative opinion about you.

[NewLifeAhead]

whyme... God Bless you and your family for sacrificing and serving our country (hubby). You don't need to explain yourself to these people that write that garbage. It's a business decision you and your family need to make to turn things around. I wish you and your family well through this process.

[pcn]

Thanks for the heads up about Sigferl. He needs to understand that bad things happen to good people.

I cant believe it took that long for someone to expose the troll.

I think you will find almost unanimous agreement that spending retirement funds to pay your cc's is a bad idea. Spending retirement funds to survive is a little different. If it was to save your house, and there was something coming in the very near future that would change your financial situation it might be worth considering. If there is nothing changing in your situation, that exempt (protected) money will eventually be gone, and you'll still be in the same spot. Definitely talk to several atty's to get different (free) opinions. Good luck, and beware the troll!

[pcn]

PS - I seem to remember when reading about the means test that in certain cases a deployment waives the means test requirement for a ch7. I'm sure an atty will talk more about that, but it may be something small that helps make things easier during the stressful & difficult pre-bk planning.

[catleg]

Yes you're exempt from the ch 7 means test if you get a reservist deployment or active duty status >= 90 days and the exemption lasts for 540 days (about 1 1/2 years) after the deployment.

[jribe]

I'm not really sure about what kind of retirement plan it is. I think it's profit sharing. I don't know...it's stocks that the company my husband works for gives to their employees. He actually only has about 18k worth of stocks and we need to cash some in to pay the lawyer and orthodontist. I would think that's a necessity but I'm not sure how the courts will feel.

necessity or not- you will HAVE to exempt what every money you pull out. NO QUESTION on that.

It will also be included on your six month income. Can you still qualify for a chapter 7 with this included?

If not- file sooner; and cash out once you've had your 341.

Don't do anything rash without looking at the consequences. I understand your situation; and that you need the money. But you do need to make sure you can still file.

Look at your states exemptions as well.

good luck

[jribe]

sorry- one other thought; the stock market has really plumetted through this recession- it's a better idea to hold on to the stocks (they should increase in value again- not saying when!) because otherwise there is no way you can make up the loss...

Just another thought on that.