Question about simple IRA

[wnguyen]

Any input, feedback, suggestion, etc. much appreciated.

Today I took a look at the copy of my filing again and noticed that on the exemption schedule, my simple IRA was listed but not as "not property of bankruptcy estate" and in the income section there were "IRA distribution" and "income tax refund".

My question is this: will the trustee take away my simple IRA and the income tax refund? I'm also afraid that he will ask for the IRA distribution too, as I took it out of the account last year to pay for various expenses. Am I in trouble or what?

[tcreegan]

Ira ok

Hi wnguyn,

The IRA is untouchable. Completely exempt.

Once $$ comes out of the IRA it loses protection. BUT, if you spent it on legit expenses (ie: not luxury items) and it is all gone, they cannot come after it.

Your 2009 tax refund is fair game. There are some parts of tax refunds that are not touchable. EIC is one of them, I can't remember the other. Maybe that was a Colo rule??

(lot of help I am, can't remember half the stuff)

Remember you might have some exemption for cash on hand. Federal exemptions allow quite a bit, including any unused homestead exemption.
If you are in a state with state exemptions, check them out looking for cash or generic "property" (a guru on the forum told me cash = property)

Hope this helps,

Tom in Colo

[wnguyen]

Thanks Tom. Now I got some other thing that I'm worried about. The IRA account was closed last February and I used the fund for part of my wife's hospitalization. Is that considered part of my income for the means test? If it is, then I might be over the state median for $1540. Now I realized that it was stupid of me to take the money out and close the account down.

BTW, wedding expenses considered legit expenses or luxury expenses?

[tcreegan]

Hi wnguyen,

Moving money around from account to account is not income.

Wedding expenses could very well be looked at as luxury. Keep the costs down, keep recpts, even keep estimates from higher priced companies that you did not use to show you are not trying to be "luxurious"

However you do it, get that IRA money spent on legit expenses ASAP.

Tom in Colo

[despritfreya]

In response to

"Moving money around from account to account is not income."

Depends upon your jurisdiction and what the UST considers income in the jurisdiction. Remember, the funds sitting in the IRA have not been taxed. Removing them creates a taxable event and, at least where I am, an early withdrawal (not a loan say against a 401K) IS income for means testing purposes.

Wnguyen, try to find the web site for your local UST's office. It may give you a rundown of the types of "income" you would need to include for means testing - just a thought. You could also call the UST (without giving your name) and see if someone can answer that question - assuming it is not considered giving legal advice.