Ira contribution within 90 days of filing

[BRENERD]

Before I knew that I would have to file for Chapter 7, I made a $6,000 contribution to my existing IRA ($5000 + $1000 catchup). This was for the current year and I did it May 7th and I filed June 23. Contribution was for 2010 and was the same as I made in 2009. I have contributed to my IRA in each of the past 5 years. My contribution in 2009 was also in the first half of the year. I live in North Dakota. I think the Trustee wants to disallow it. Can he do that? If so, is it solely because it was within 90 days, a black and white issue, or can I defend it as what I normally have done each year? Thank you!

[Flamingo]

Yes the trustee can do that. Have you discussed this situation with your attorney? When you file BK you are insolvent (broke) and if one deposits $5,000 into an IRA just prior to filing, what does that indicate?

[BRENERD]

I fully understand your logic. But if this was a 401K payroll deduction of 6% based on earnings of $80,000, the total deduction within 90 days, would have been $1,200. Would the Trustee want that? If you had an insurance policy with an annual premium of $5,000 that was due within the 90 period and you paid it as you have done year after year, would he want that? Both the IRA and Cash Value of life insurance are an exemption up to $100,000 each with a total of $200,000 in North Dakota, why not, then, the monies going into it. You can declare Chapter 7 without being insolvent. You can have funds on hand, but not the capacity to pay the creditors going forward. In my case, I tried to work out a Debt Management Program with two different entities. Both said I could not afford it. I do have some exemption left for cash on hand, checking/savings account etc. so that will soften it.