Unemployed and wondering about pension benefits

[oscar123]

This is my first post so I hope my questions make sense and that I am posting this in the correct thread.

I live in Tennessee and I have filed for Chapter 7. My meeting with the trustee was actually today. I would say it lasted about 5 minutes, but I doubt it was even that long. The trustee told me that my case would be filed as zero asset. I am doing a reaffirmation for my car loan. I know that it will take 60+ days for the discharge etc.

I am currently unemployed and have been for about 30 days. I recieved notification showing that my unemployment has been denied and that I will have to go through an appeal process (this was somewhat expected). Needless to say my funds are running low and are close to running out.

I worked at my previous employer for 5-1/2 years so I have a decent pension amount built up. Since I am no longer employed the pension is available to me as a lump sum (after taxes and penalties, etc.)

So I guess my questions are:

1) Has anyone out there ever taken a lump sum out of their pension during / after a bankruptcy and how did it affect your bankruptcy. I know that pensions / 401ks are normally exempt, but I don't think that would apply in my case. I don't want to do anything that would cause the trustee to come and take this money as I desperately need it to live on.

2) If you waited to take the money out how long did you wait? Until after the discharge or later? I wish that my living situation could be taken into account so that I could have access to the money now, but somehow I doubt that will happen.

I of course will take all of my questions to my lawyer tomorrow, but for now I thought it would be helpful if anyone out there had been through a similar situation and had any advice. Any and all feedback is appreciated.

[keepinitreal]

I'd recommend that you wait about 8 weeks and withdraw the money the first week in January. That way you won't have to pay income taxes on it for the year 2010, and you'll probably be in a much lower tax bracket in 2011. Do you have family/friends who can help you out until you withdraw your pension funds?

[Flamingo]

Discuss fully with your attorney. Realize that when you take the money out it will be subject to a 10% penalty by the IRS to be listed on your federal tax form for the year in which the distribution was taken out and you will also be required to pay taxes (state and federal) on the withdrawn amount. You will have to withhold at least 20% of the distribution amount on the side to pay estimated taxes to both the IRS and your State. So realize right off the bat you are losing about 30% of the funds that you have saved. If you have saved a substantial amount, you can see why it is not a good idea to touch retirement savings but if hardship prevails, one has no choice. You now also have realized that filing BK does not solve unemployment or cash flow issues and that when your retirement funds run out, and you are still unemployed, you may have to consider moving in with family or family help or government assistance. It's tough out there...