Need opinions/advice regarding 401k early withdrawal with no penalty...

[justbroke]

Very nice!

[NoMoreCards]

Good Deal!!
It is always better to be sure, IMHO

[cupcake]

Update:

I spoke with one of my attorneys this morning and she confirmed that I can take any/all of the 401k in cash and I should not have an issue with the trustee. As justbroke said, it was fully disclosed in the divorce judgment and in my filing so there's no problem.

Thanks, everyone, for your input!

[sigferl]

Thanks for your post CC. I agree that you must have an emergency fund(9-12 months salary), you can rebuild retirement account later.

Freedom is not free.

I need an emergency fund. I'm single, I live in an apartment, I don't have family to rely on in the case of a job loss or other hardship and I have no credit to fall back on (not that I want or need that anyway). It's ALL me and I need an emergency fund/cushion. And, if I lose my job, I would be unable to borrow from my 401k, leaving me to take an early withdrawal with the penalty.

[cupcake]

Very interesting, so you were a "no asset" case. I would say, that if the Trustee knew... you disclosed it on your forms... and the Trustee didn't want it... then you personally are okay.

I was just trying to do my due diligence and make sure the distinction is known. I didn't know that you were entitled to it prior to filing. The Trustee would have been alerted (which you did), and did not want it.

Correct; I was a "no asset" case. I don't recall what was disclosed on the paperwork as it relates to the 401(k) transfer I'd be receiving from the ex (possibly nothing seeing it would have been considered exempt 401k funds), but he was given the divorce judgment that clearly spelled out what I would be receiving. I know for sure that he reviewed it because the 401(k) transfer was somewhat complex, as there was a personal injury settlement that also played into how much I would receive from the 401k. The trustee discussed the judgment with me and my attorney during my 341.

Truthfully, it surprises me that my trustee let this go, didn't go after it and closed my case. Unless, he's keeping a watchful eye and waiting - is that possible? I was discharged in mid-July 2009 and my case was closed shortly afterwards. The reason I'm surprised is because my trustee is well known for being very difficult and for going after every possible penny. The trustee actually converted my ex's CH7 to an asset case because he wants the tax refund my ex will get next year because of some hefty tax credits he'll be getting.

[justbroke]

I actually became "entitled to acquire" the property prior to filing. My divorce was final in December, 2008 and I filed for CH7 in February, 2009. Technically speaking, I've been entitled to it since December, 2008 but my turd of a divorce attorney is finally *just* getting around to getting the QDRO done. And, as I mentioned, the trustee was fully aware of my entitlement to that portion of my ex's 401k. During my 341 he never asked me anything about it or if I intended to cash it out or roll it over.

Very interesting, so you were a "no asset" case. I would say, that if the Trustee knew... you disclosed it on your forms... and the Trustee didn't want it... then you personally are okay.

I was just trying to do my due diligence and make sure the distinction is known. I didn't know that you were entitled to it prior to filing. The Trustee would have been alerted (which you did), and did not want it.

[cupcake]

11 USC 541 (Property of the Estate) specifically says in section 5, that "any interest in property... on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date".

It is 180 days of the filing date. Trustees say dumb things sometimes, and that is specifically why I'm going to say that people with property, really need to be filing with an attorney. Do as I say... not as I do! LOL

In this case, Cupcake, I may have made a mistake. The BK code reads " becomes entitled to acquire" within 180 days. This could mean that if you were entitled to it within that 180 days,

Now, this was probably hashed out with the Trustee anyhow because you knew that you were in divorce proceedings when you filed. The Trustee should have inquired into any disposition of property. I think if you didn't become entitled to it within that 180 days, it may be property of the estate.

I actually became "entitled to acquire" the property prior to filing. My divorce was final in December, 2008 and I filed for CH7 in February, 2009. Technically speaking, I've been entitled to it since December, 2008 but my turd of a divorce attorney is finally *just* getting around to getting the QDRO done. And, as I mentioned, the trustee was fully aware of my entitlement to that portion of my ex's 401k. During my 341 he never asked me anything about it or if I intended to cash it out or roll it over.

[justbroke]

So wouldn't her 401k, be considered property from a divorce?

That's exactly what I want to know; I'm guessing that it is. But, seeing I'm more than 180 days post filing I'm not sure that it matters.

11 USC 541 (Property of the Estate) specifically says in section 5, that "any interest in property... on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date".

It is 180 days of the filing date. Trustees say dumb things sometimes, and that is specifically why I'm going to say that people with property, really need to be filing with an attorney. Do as I say... not as I do! LOL

In this case, Cupcake, I may have made a mistake. The BK code reads " becomes entitled to acquire" within 180 days. This could mean that if you were entitled to it within that 180 days,

Now, this was probably hashed out with the Trustee anyhow because you knew that you were in divorce proceedings when you filed. The Trustee should have inquired into any disposition of property. I think if you didn't become entitled to it within that 180 days, it may be property of the estate.

[cupcake]

You said it yourself... you're well over 180 days post filing. It is not property of the estate!

Gotcha. Thanks, justbroke. You rock!!

[justbroke]

Hypothetically speaking then, if I were to cash out any portion of my ex's 401k that was awarded to me per our divorce judgment dated December 23, 2008 and transferred per a QDRO dated September 15, 2009, would that fall into the category of being "property from a divorce?" I'm well over 180 days post filing.

You said it yourself... you're well over 180 days post filing. It is not property of the estate!

(See my next note. The code is pretty specific on when you were entitled to it versus when you acquired it. The statement I wrote here is very generic. It does not take into account when the person was entitled to the property.)

[cupcake]

In any case, I wanted the OP to cover her bases and discuss it with the attorney just to make sure it didn't bite her in the hind IF she took the cash. So wouldn't her 401k, be considered property from a divorce?

That's exactly what I want to know; I'm guessing that it is. But, seeing I'm more than 180 days post filing I'm not sure that it matters. But... when did I actually "receive" this property? Should the date of receipt be considered the date of the divorce judgment, the date of the QDRO or the date the money is transferred into my account? If it's the date of the divorce judgment then I received it prior to filing BK. Or, maybe none of it even matters?

[NoMoreCards]

The part I underlined, is not accurate. I'm not sure if you are recalling what the Trustee said incorrectly, or the Trustee actually stated that.

The only thing that you must report in the 180 days after filing (not after your 341 Meeting), is an inheritance, life insurance policy proceeds as a beneficiary, or property from a divorce. No where in the Bankruptcy Code (11 USC 541) does it say "lottery" or from anywhere. The money has to come from those 3 specific things.

You could technically win the lottery the day after filing, and it is NOT property of the Bankruptcy Estate in a Chapter 7.

The trustee may not have used the exact word of "lottery", but he made it very clear that any large funds we come into, we were supposed to report it for up to 6 months after discharge. But he did say 6 months after discharge. I can't help but wonder if my Trustee was a bit confused anyhow because made a comment to one debtor that they could not file a 13, within 8 years of a 7 (and we all know that is incorrect).

Thanks for the info Justbroke. I am sure what you say is accurate, as you seem more knowledgeable than my Trustee was. In any case, I wanted the OP to cover her bases and discuss it with the attorney just to make sure it didn't bite her in the hind IF she took the cash. So wouldn't her 401k, be considered property from a divorce?

[cupcake]

If your 401(k) allows loans, and you have no loans taken out... then the 401(k) account is the PERFECT "emergency" account. You could take a loan against it (not considered a distribution), or in a dire emergency (and I won't define that) take a taxable distribution. I'm not advocating the dire emergency, but it is there.

When people have large sums of money available to them (readily), it's sometimes easy to "pinch" off it, until it's gone. I don't think you're be maxing out your contributions because it's part of a (qualified) domestic support order, but you'd have to consult a tax expert on that.

My 401k account is sponsored though my employer allows for loans; I have never taken a loan on it. The funds that I am receiving from my ex will be transferred into a separate 401k account in my name with HIS investment company and I would never be able to take any loans on that account.

I definitely understand the "pinch off" theory when it comes to money. I don't see that happening to me because I really have nothing to spend it on. I'm single and I have everything I could possibly need. Anything is possible, but I just don't see myself pissing that money away especially since going thru a BK and learning a lot over the last year or so. Plus, I would put most of it into a money market account that would require me to have to actually make a phone call to request a check to take money out.

[cupcake]

The part I underlined, is not accurate. I'm not sure if you are recalling what the Trustee said incorrectly, or the Trustee actually stated that.

The only thing that you must report in the 180 days after filing (not after your 341 Meeting), is an inheritance, life insurance policy proceeds as a beneficiary, or property from a divorce. No where in the Bankruptcy Code (11 USC 541) does it say "lottery" or from anywhere. The money has to come from those 3 specific things.

You could technically win the lottery the day after filing, and it is NOT property of the Bankruptcy Estate in a Chapter 7.

Hypothetically speaking then, if I were to cash out any portion of my ex's 401k that was awarded to me per our divorce judgment dated December 23, 2008 and transferred per a QDRO dated September 15, 2009, would that fall into the category of being "property from a divorce?" I'm well over 180 days post filing.

BTW, thanks for stopping in to answer my questions. I really appreciate it!!

[justbroke]

During my 341 meeting today (also Ch. 7), the Trustee announced that just because you get discharged, you can't think your BK case is over. He said if you come into money within 6 months (life insurance, lottery, or the like) that it was our DUTY to report it to the Trustee's office.

The part I underlined, is not accurate. I'm not sure if you are recalling what the Trustee said incorrectly, or the Trustee actually stated that.

The only thing that you must report in the 180 days after filing (not after your 341 Meeting), is an inheritance, life insurance policy proceeds as a beneficiary, or property from a divorce. No where in the Bankruptcy Code (11 USC 541) does it say "lottery" or from anywhere. The money has to come from those 3 specific things.

You could technically win the lottery the day after filing, and it is NOT property of the Bankruptcy Estate in a Chapter 7.