Hardship withdrawal before 341 Meeting

[salesa]

I live in Columbus, Ohio. I filed my Chapter 7 on 03/16/10. My 341 Meeting is APril 23,2010. Just wanted to know if it's okay to take out of my retirement or will that have affect on my discharge. Any suggestions would be helpful.

[JackBondLove]

No problem. I presume that you mean after the filing. This is the key date.

[justbroke]

I would not touch it before the 341 Meeting and certainly would question anything up until the Trustee files either a no distribution report or the case is discharged.

A hardship withdrawal is an issue from a financial planning perspective. I will just say that it's a bad idea. There are significant tax consequences! You may end up paying 36% tax on that withdrawal. The 10% penalty tax is no joke either.

You should exhaust all other means first, which includes selling personal property.

[salesa]

Okay thank you for the help.

[justbroke]

Just to clarify... everything you own, including money in the bank, balances in 401(k)s, stock accounts, homes, cars, boats, etc, is property of the bankruptcy Estate. Until you "at least" have your 341 Meeting and find out if there are issues with your Exemptions, I would not touch the 401(k).

The whole "don't ever take a withdrawal" from a 401(k) is another matter.

[music12]

i also wouldn't take anything from a 401k whether or not you are in ch 7 because of the dire tax consequences. but imo, the 401k is exempt from any action by the trustee, so i don't believe withdrawing from it could cause a problem with the trustee. i have never heard of any possible issues with exemption of 401k's. but maybe justbroke has?

[salesa]

I talked to my attorney and he said it probably wouldn't be a good idea to do that before my 341 hearing, but after that it would be up to me. I think i'm just going to hold off until my discharge. I don't want anything to mess up my bankruptcy. I really do need the money for my rent, but i will just have to pay it late. Thanks for the advice, and i will keep you posted on my 341 Meeting. I'm pretty nervous.

[salesa]

I just checked on pacer and the trustee wrote....Chapter 7 Trustee's Report of No Distribution: I, ######, having been appointed trustee of the estate of the above-named debtor(s), report that I have neither received any property nor paid any money on account of this estate; that I have made a diligent inquiry into the financial affairs of the debtor(s) and the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law. I hereby certify that the estate of the above-named debtor(s) has been fully administered. I request that I be discharged from any further duties as trustee. Assets Abandoned ### Exempt### Claims scheduled to be discharged without payment ###.

So i heard that is good news. I'm really short on money and have no ways of paying my rent or utilities bills and my son's daycare. Do you think i should be okay to do my hardship withdrawal now?

[GWBcasualty]

I just checked on pacer and the trustee wrote....Chapter 7 Trustee's Report of No Distribution: I, ######, having been appointed trustee of the estate of the above-named debtor(s), report that I have neither received any property nor paid any money on account of this estate; that I have made a diligent inquiry into the financial affairs of the debtor(s) and the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law. I hereby certify that the estate of the above-named debtor(s) has been fully administered. I request that I be discharged from any further duties as trustee. Assets Abandoned ### Exempt### Claims scheduled to be discharged without payment ###.

So i heard that is good news. I'm really short on money and have no ways of paying my rent or utilities bills and my son's daycare. Do you think i should be okay to do my hardship withdrawal now?

Yes.
YOu can put it back in within 60 days within tax consequences.
Otherwise you will have to report it as income in your 1040 and the amount will be subject to an added taxation of 10%

[salesa]

So it won't hurt my bankruptcy? I'm really in need of some money to survive?

[tdawg]

Yes.
YOu can put it back in within 60 days within tax consequences.
Otherwise you will have to report it as income in your 1040 and the amount will be subject to an added taxation of 10%

Just to clarify this. I don't believe you can put it back into the same account to avoid the tax consequences within 60 days.

If you open a new ira at some other bank in the same amount that you withdrew (before they deducted any withholdings), and tell them that it is an indirect rollover (so they can flag it when they send the info to the irs), then you avoid the penalty and tax owed on it. Google "indirect rollover" and you'll find a bunch of web pages about it.

[tdawg]

So it won't hurt my bankruptcy? I'm really in need of some money to survive?

If you need the money to survive, then you need it. I asked my attorney about this same exact issue after the 341, and he said it would be no problem for my bankruptcy. But asking your attorney to be sure would be best. And if you can open a new ira within 60 days to avoid the taxes and penalties, that would be smart too. Good luck!

Just one other sidenote: I believe if you take a hardship withdrawal, then you CANNOT roll it over within 60 days. But checking with a financial advisor at a place that offers iras (any major bank, fidelity, etc.) would be smart. They'll tell you all the rules if they think you're a potential customer. :-)

[music12]

check the tax rules carefully and do some calculations taking into account NOT ONLY THE 10% penalty but also ordinary income taxes. you'll have to pay those out of pocket. so make sure it makes financial sense.

as far as your bk goes, the trustee is not going to object to your exemptions, so i agree that this would not hurt your bk.

[salesa]

I'm only going to take like $3,000. And within 6 months my employer said i can get back in the program. I have to pay my rent and bills.

[Majakat]

If it is employee sponsored can you take a loan against it? No penalties then and you pay back the interest to yourself -