Time frame for a Trustee making a claim

[8itagain]

Filed - 2/26/10
341 - 3/26/10
Discharged - 6/30/10

When I filed (Pro Se) I had $27,000 in my savings account. This was borrowed money from my 401K that was supposed to have transferred out of my account to payoff my 401K loan (the transfer was delayed, unknown to me). The Trustee told me he would claim the money and is requesting that I take a loan from my 401k and pay him ... just what I need as I have no assets and I will come out of this process with a 27k loan payment!!
Anyways my question is ... nothing has ever been filed to claim the money (just discussions verbally), is there a time frame for the Trustee to file a claim with the court?

Thanks!

[tcreegan]

Basically the trustee wants all your 401K money to distribute to creditors. What you need to do now is find out what your state exemption is for retirement funds. Under federal rules you exempt the entire amount of a qualified 401K and no one can touch it. State law may exempt the same or less. Whatever it is, I suspect it would be well worth your time to file an amended Schedule B and C and get this money exempted and out of the trustee's hands. I would do this ASAP and make sure the trustee gets a copy with changes highlighted.

Remember, the trustee works for the creditors, not you. They are not on your side. This may be a great example: A trustee trying to grab 401K money which they probably know is fully exempted but just didn't see it on schedule C.

Good luck,

Tom in Colo

[gmk]

I believe that money from a 401k that is out of the 401k and in your possession is at that time non-exempt and fair game for the TT regardless of the intentions for the money. If monies go directly from one exempt account say a 401k and into an IRA without passing through your hands I believe that would still be exempt. I was going to make a 401k to ira switch since being unemployed my 401k could not accept continuing contributions nor loan repayments (except in full). My attorney said it was OK to do it but I was worried that the 401k people may screw it up and send me the disbursement so I decided to wait until after discharge.

I hope you're not out the money and you can get the funds exempted somehow but I don't know how to do it.

Good luck with this.

[scorpion35]

I believe that money from a 401k that is out of the 401k and in your possession is at that time non-exempt and fair game for the TT regardless of the intentions for the money. If monies go directly from one exempt account say a 401k and into an IRA without passing through your hands I believe that would still be exempt. I was going to make a 401k to ira switch since being unemployed my 401k could not accept continuing contributions nor loan repayments (except in full). My attorney said it was OK to do it but I was worried that the 401k people may screw it up and send me the disbursement so I decided to wait until after discharge.

I hope you're not out the money and you can get the funds exempted somehow but I don't know how to do it.

Good luck with this.

Yup thats it
money in a 401 is exempt BUT if u take it out and deposit in a regular checking/saving account its no longer exempt and the trustee will take it

[8itagain]

Yup thats it
money in a 401 is exempt BUT if u take it out and deposit in a regular checking/saving account its no longer exempt and the trustee will take it

This is the case.
My question is ... is there a time frame for the TT to file a claim with the court?
I need to move on with my rebuilding of my life and a $27k loss in my 401k plays heavily into my planning.

[tcreegan]

time for claim

Hi 8itagain,

My perception is that the trustee has the same 60 days as creditors to file a claim. But....they can file a motion for more time.

The 27k you had in your savings acct. might be hard to protect. When funds from a dedicated source (401k, IRA, etc) are "comingled" with other funds they become regular funds. But.....some courts have ruled that if the $$ from a dedicated source (401k, IRA, etc) go into a single account by themselves, they do not become regular funds unless you start using the funds. In other words, someone took $$ from a 401K, put it into a saving account by itself. Later put the $$ back into the 410K. Judge ruled the time it spent in the savings account did not leave it open to be confiscated as regular funds.

"The Trustee...... is requesting that I take a loan from my 401k and pay him ."
What???!!! This sounds so illegal I would immediately speak to the US Trustee and inform them that this is happening.

Good luck, let us know how it all comes out....

Tom in Colo

[backtoschool]

Hi 8itagain,

My perception is that the trustee has the same 60 days as creditors to file a claim. But....they can file a motion for more time.

The 27k you had in your savings acct. might be hard to protect. When funds from a dedicated source (401k, IRA, etc) are "comingled" with other funds they become regular funds. But.....some courts have ruled that if the $$ from a dedicated source (401k, IRA, etc) go into a single account by themselves, they do not become regular funds unless you start using the funds. In other words, someone took $$ from a 401K, put it into a saving account by itself. Later put the $$ back into the 410K. Judge ruled the time it spent in the savings account did not leave it open to be confiscated as regular funds.

"The Trustee...... is requesting that I take a loan from my 401k and pay him ."
What???!!! This sounds so illegal I would immediately speak to the US Trustee and inform them that this is happening.

Good luck, let us know how it all comes out....

Tom in Colo

The OP took the money out of the 401k and the trustee is claiming it. It is perfectly legal for the trustee to do this. Once you take money out of an exempt account and put it into a non-exempt account, no matter what you were going to use the money for, the trustee can claim the money.

[gmk]

With respect to the IRS you are allowed to take money from IRAs and then have 60 days to redeposit it into another IRA without tax consequences. I realize that BK and tax regulations are not the same but it may be possible to successfully make that argument especially in view of the case law comments made above by tcreegan. For 27K I'd try any tactic I could before rolling over. If you're past the 60 days then ??

[backtoschool]

With respect to the IRS you are allowed to take money from IRAs and then have 60 days to redeposit it into another IRA without tax consequences. I realize that BK and tax regulations are not the same but it may be possible to successfully make that argument especially in view of the case law comments made above by tcreegan. For 27K I'd try any tactic I could before rolling over. If you're past the 60 days then ??

In bankruptcy, once the money is out of the exempt account it is available to the trustee and must be exempted with cash or wild card exemptions. No exceptions.

[8itagain]

In bankruptcy, once the money is out of the exempt account it is available to the trustee and must be exempted with cash or wild card exemptions. No exceptions.

Dang
If I don't give up the money, would the trustee just garnish my wages?

Still need another question answered. I used our exemptions (10k wife and I) to keep our truck, the car was not reaffirmed and I let it go back to the bank as I owed 20k and it booked for 14k. I plan to borrow some money from my 401k and by a car for the wife sooooooooooo the question is when can I pull exempt money out pay for a car and not worry about the trustee coming after the car ... the 27k of course will be another issue.

Filed - 2/26/10
341 - 3/26/10
Discharged - 6/30/10

[eventsdj]

I have nothing to add except Im jealous for people that have this money to pull out and count on!
We filed our BK and don't have a penny! I guess we will never retire!

[backtoschool]

Dang
If I don't give up the money, would the trustee just garnish my wages?

Still need another question answered. I used our exemptions (10k wife and I) to keep our truck, the car was not reaffirmed and I let it go back to the bank as I owed 20k and it booked for 14k. I plan to borrow some money from my 401k and by a car for the wife sooooooooooo the question is when can I pull exempt money out pay for a car and not worry about the trustee coming after the car ... the 27k of course will be another issue.

Filed - 2/26/10
341 - 3/26/10
Discharged - 6/30/10

It sounds like your trustee is keeping your case open and trying to get assets. You need to check pacer and see if you were discharged as an asset case, and what the trustee's interim and initial reports are in regards to the assets he is trying to claim. The fact that you were discharged does not preclude that the trustee turned your case into an asset case. What does pacer say? Has an interim report or a report of no distribution been filed by the trustee? If your case is an open asset case, and your withdrawn 401k cash is listed on the matrix as an asset, then you would be at risk taking more money out of the account until the case is closed.

[8itagain]

It sounds like your trustee is keeping your case open and trying to get assets. You need to check pacer and see if you were discharged as an asset case, and what the trustee's interim and initial reports are in regards to the assets he is trying to claim. The fact that you were discharged does not preclude that the trustee turned your case into an asset case. What does pacer say? Has an interim report or a report of no distribution been filed by the trustee? If your case is an open asset case, and your withdrawn 401k cash is listed on the matrix as an asset, then you would be at risk taking more money out of the account until the case is closed.

Pacer shows Ch 7 asset, discharged
no interim or initial reports from trustee or any report showing assets to claim

As a re-cap............

When I filed (Pro Se) I had $27,000 in my savings account. This was borrowed money from my 401K that was supposed to have transferred out of my account (prior to filing date) to payoff my 401K loan (the transfer was delayed, unknown to me). The Trustee told me he would claim the money and is requesting that I take a loan from my 401k and pay him ... just what I need as I have no assets and I will come out of this process with a 27k loan payment!!

Well ....... I just found Title 11 522 (4)(D)(ii)

As my money was distributed from my account (in the form of a loan) then returned to my account in less than 45 days it looks promising!!

Am I reading the law right?


Filed - 2/26/10
341 - 3/26/10
Discharged - 6/30/10