Questionable deposits

[eddiep]

We are preparing to file on March 1st, because my husband was out of work from Sept 19 - Dec 10 and want to include all of that time, it doesn't matter though, we are still under the median income now that he is back to work. I was looking over my bank statements and there were a few deposits I am worried about. I paid all cc in September, none in October.

August 8 - $9000 - 401k cash out
Sept 12 - $4000 - cash advance
October 10 - $1900 - loan from parents
November 13 - $2900 - sold motorcycle to family member
December 18 - $3400 - 401k loan

[lrprn]

We are preparing to file on March 1st, because my husband was out of work from Sept 19 - Dec 10 and want to include all of that time, it doesn't matter though, we are still under the median income now that he is back to work.

All sources of income for the six full calendar months before filing count towards the income figure on your Means Test. Let's go through these one by one....

August 8 - $9000 - 401k cash out

If you file March 1, then the lookback will be Sept 1 through Feb 28. August 8 is outside the six months and won't count into your income for the Means Test (although you will very likely pay a 10% tax penalty if you don't pay back the full $9000 within a year). Also I'm sorry to hear you did this because your 401K would have been completely protected when you filed bankruptcy.

Sept 12 - $4000 - cash advance

Assuming this advance is from a credit card and the advance was unsecured, then you need to consult with some experienced bankruptcy lawyers in your area to know if it counts towards your income figure or not. The $4K advance should be discharged in full once your Ch 7 is discharged and closed.

October 10 - $1900 - loan from parents
November 13 - $2900 - sold motorcycle to family member
December 18 - $3400 - 401k loan

Since each of these additions to your income was done within the six full calendar months before filing, every one of these needs to be added to your Means Test calculation for your income. Did you do that?

Again, I'm so sorry to see that you again took money from your 401K before filing. The same 10% tax penalty is likely if you don't repay this $3.4K in full before a year is up. Your entire retirement will be completely protected once you file. Please don't take any more loan $$ from your 401K before filing!

[Tromploi]

We filed Jan 16th, between Dec and 1st of Jan deposited 26K from husbands job. Thing is, it's averaged over 6 mos. He always makes a ton end of the year. But the rest of the year it's not like that (darn it). I am worried about this months deposit, it's even more than those combined and our 341 is 2/24. If need be, I am going to make a BIG IRS payment, we owe them a bunch anyway. But again, it's all averaged out.

[eddiep]

oh no!

[eddiep]

I checked the figures and we are still more than $2000 under the median income for the 6 months. Safe!

[Help!]

The sale of the motorcycle will probably draw the case trustee's interest, but as long as you disclose it as income and explain that you sold it to try to keep up with your debt obligations that's fine. The loan from the parents is okay, too, but be sure you fully disclose this as a loan and list them as creditors - financial arrangements made with family members are also sure to draw attention.

[eddiep]

Thank you! The the kelly blue book value was only $200 more than we sold it for. I believe you but I don't get it, why is a "loan" counted as income? Luckily we haven't paid his parents back yet. Does the loan on my 401k get discharged during bk?

[Trixie007]

Does the loan on my 401k get discharged during bk?

No - this is a payback to yourself essentially! If you don't pay it back it gets treated as an early withdrawal and you pay the 10% penalty to the IRS in addition to paying taxes on it as income.