TSP (Thrift Savings Plan) payout before 341

[phxtoatl]

Greetings,

I am recently unemployed. I have a question about getting my TSP (US Government Thrift Savings Plan) paid out during bankruptcy. I have had no income for the last 1 ½ months. I want to file this week, but I want to if I can and should take the option to have my TSP paid out to me. I have about $4000 in it. I need to live on while I’m job hunting. I’m also expecting back-pay for unused vacation pay earned PRIOR to 6 months ago (I’m still trying to figure out how I claim that as income). I don’t know what I’ll get after taxes for the vacation check nor what I’ll get from my TSP (taxed heavy I think) but If I have to add my TSP value alone to my prior 6 months earnings it will put me over the median. I might have the option to leave my TSP in limbo for a few months until I decide to pay it out or put it into another 401 or IRA or whatever, but I am expecting to need the money.

I understand that I can list the $4000 in my TSP as exempt (IRA..) but what would happen if I listed that as such and withdrew it before my 341 meeting because I need it to live on. Will my trustee try to let me know that I should have predicted I was going to use it or will he understand that I just need to money to live on and not be nerved when he considers my circumstances. Either way, will creditors have claim to my TSP payout (which will probably be about (2500.00 I’m guessing). If they do have claim in any way, can I somehow justify to someone that I need the money to live on and pay necessities because I have zero income otherwise; most importantly can I easily convince the trustee and the judge?

I also understand that even if I leave it alone, won’t people in decision making power see that I no longer work there and something has to be done with the 401 anyway.

I really need the money. Is this just something I can ask the trustee as soon as I find out who it is after filing to pave the way on it?


Almost ready, want to file this week.

Thanks

[AngelinaCat]

Hello. I have removed your identical thread that you posted in the Ch7 board. Please do not make duplicate posts or threads in several different forums. That makes it difficult for the members to follow, and give you answers, and therefore is against Forum rules. These are located at the top of each forum. Please take a few minutes to review.

Thanks

[AngelinaCatHub]

In a word: NO! Once you take out an exempt amount from a retirement fund, is is cash and belongs to the estate. A VERY unwise decision. Don't bother to ask the Trustee any thing. Most a very nice, but remember, they are working for the creditors not the debtors. The letter of law does really not count when they have to do their jobs. Like a Judge, they must be obliged to do the legal thing. Get by the best you can until your DISCHARGE and no time before. Make it through. At your 341, you will be asked if anything changed, and if you do not say, now that becomes a felony known as perjury. You really don't want that to happen in Federal Court and then get your bk dismissed. Keep you retirement where it is. It will cost you in many ways to steel from it. 'Hub

[justbroke]

I concur with Mr. Cat. I wouldn't expose yourself. It is safe where it is at. I would wait until the Trustee at least files a no distribution report if you're a no asset case. While the money wouldn't magically become a part of the bankruptcy estate because it occurred post-petition, the key would be not liquidating property of the estate before your exemptions accepted. The back pay, unused vacation, may cause some issues and in some Districts it could be considered income for the lookback.

It's just better to err on the side of caution. Until your case is actually discharged or dismissed, everything remains property of the estate subject to the exemption status. I must also say that tapping into your retirement account before age 59 1/2 may have some negative tax consequences and penalties making the $4,000 worth only about $2,600 (depending on many factors).

Have you looked to other resources -- like family friends -- to at least help you during your pending discharge period?

[phxtoatl]

Thanks for the information. What if I withdrew the $4200 from my TSP prior to filing Chapter 7 so I can pay bills ahead a month or two? I expect that the court might wonder if I spent it all; they would probably imagine that there is cash leftover, right? I know I should keep it in there but I plan to return to a fed job soon, and a good one when my credit clears up. I'll start a TSP again and contribute more than I did last time to make up for this. I'm still young...sort of...

Could this withdrawal be called income then during a look back period that includes this month since I'll file next month?

Can I pay car payments ahead a couple of months before declaring BK?
What if I wanted to renew a 6 month insurance premium?
How far can I pay ahead on anything?

[justbroke]

Could this withdrawal be called income then during a look back period that includes this month since I'll file next month?

This is a District-specific question. Some Districts don't consider it income, while others may claim that it is income (since it's deferred income).

Can I pay car payments ahead a couple of months before declaring BK?

This is a bad idea, since you'll only be paying down the premium. Most lenders don't allow you to apply a large payment as "multiple" pre-payments. In other words, they'd take your $$$$ and make the monthly payment (to bring the loan current), and then apply the difference to the reduce the principal. At least that's how most work.

What if I wanted to renew a 6 month insurance premium?

That wouldn't be an issue.

How far can I pay ahead on anything?

Probably almost nothing, as mentioned with the pre-paying the vehicle. It's a tough place to be and I don't have a good answer. If you did take the money before filing, you could spend it on food, clothing, etc. However, prepaying the car and other similar creditors probably won't work the way you'd like it to work.

[AngelinaCatHub]

To add to your post JB, it is also preferential to pick and choose as it is obvious the OP wishes to keep the car. He needs to talk to a lawyer before he makes a most common mistake in liquidation of exempt assets for immediate relief that will end up biting him in the 'end'. 'Hub