Spending down cash prior to Ch7 filing-IRA?

[LadyInTheRed]

Florida exemptions improved quite a bit when you go from only 2k to 10k(non-homestead) in personal property exemptions allowed, plus 1K in each of our two vehicles. I have asked our paralegal to get the deal on Orlando's trustee's regarding IRA's.

The website I was looking at was not up to date, but I still can't find $10k. There's the $1k that can be double by a couple, then the $4k if you don't have a homestead. I don't find anything that says the $4k or the $1K auto exemption can be doubled. Are you sure you can double those?

[debee]

They can be doubled. I just skip all the sites now except for legalconsumer (& LadyInTheRed's blog ) because it's exhausting wading through all the outdated info.

[Cavedog]

Yes they can be doubled.

$1000 for personal property (doubled to $2000)
$4000 wildcard (doubles to $8,000).
They can both be stacked for $10,000.

In addition, up to $1,000 in value of your vehicle.(we have 2 vehicles, hence the total of $2,000).

Here is an article about it
"Posted on February 05, 2008 by Jonathan Alper
Interpreting Florida's New $4,000 Personal Property Exemption
The Florida Constitution gives debtor’s a $1,000 exemption in all personal property such as cloths, furniture, and cash in financial accounts. The Florida legislature enacted a new law in July, 2007, providing debtors an additional $4,000 "wildcard" exemption in personal property provided that the debtor does not claim a homestead exemption. Several questions have come up in recent bankruptcy cases concerning the $4,000 statutory exemption: for instance, can debtors stack the $4,000 statutory wildcard exemption on top of the $1,000 Constitutional exemption? Do joint bankruptcy debtors each get the benefit of a $4,000 statutory exemption?; and if a debtor owns a homestead but elects to abandon the homestead in bankruptcy without claiming exempt homestead equity, can the debtor claim the $4,000 statutory exemption?
The bankruptcy courts have so far liberally construed the new, $4,000 statutory exemption for personal property. More than one bankruptcy judge has ruled that a debtor can stack the exemption on top of the $1,000 Constitutional exemption provided he does not claim a homestead exemption. Owning a homestead does not disqualify the $4,000 exemption when the debtor does not claim or seek benefit of the homestead exemption. (Therefore, where one spouse files bankruptcy and claims a tenants by entireties exemption in the marital home the debtor spouse should be able to claim the $4,000 wildcard personal property exemption.). When two qualified spouses file bankruptcy courts have held that each spouse can claim the $4,000 exemption; so, where joint filers do not claim a homestead exemption. ( Or, when both spouses file and the house is "upside down" both spouses should qualify for the $4,000 statutory exemption, and the joint debtors would have a $10,000 exemption applicable to their personal property)".

I also used Justbrokes advice and downloaded BEST CASE chapter 7 software, and it was in there as well. Lastly I confirmed this afternoon with my attorney. :-)

[LadyInTheRed]

They can be doubled. I just skip all the sites now except for legalconsumer (& LadyInTheRed's blog ) because it's exhausting wading through all the outdated info.

It IS exhausting! Which is exactly why I posted that blog for CA Exemptions. Even legalconsumer.com doesn't say that the $4k exemption is doubled. But at least it lists it. Most sites don't.

Yes they can be doubled.

I also used Justbrokes advice and downloaded BEST CASE chapter 7 software, and it was in there as well. Lastly I confirmed this afternoon with my attorney. :-)

Excellent!

[tobee43]

I'd be careful about buying "things." They become assets and you don't have a very large personal property exemption in Florida. Prepaid cell phone cards are also an asset that you would have to report. I believe you are in the one district where the trustee actually might send somebody to inventory the contents of your home.

I think you should explore the IRA idea. Ask a local attorney if that will work in your district.

that's exactly what we did, we followed our atty's instruction. we had the 10k wildcard exemption. also, in our district, they didn't count food being stored as an asset, thankfully, not yet, who knows food and gas could be next as considered being assets.

in our district they absolutely do send someone out if you are a chapter 7 asset case. however, in our situation we were a non asset, we were as truthful as we could be and claimed everything. although, by the time we filed we sold everything we had for our move, it was never questioned. there was really nothing to question other than our car and we had receipts of everything we purchased for our move.

[debee]

Even legalconsumer.com doesn't say that the $4k exemption is doubled. But at least it lists it.

Yeah, they're not as clear as they could be. They state that the homestead exemption can be doubled and the 4K is allowed in lieu of the homestead, but they make the reader connect the dots. It would be better for them to be more explicit.

[button08]

same district here, our attorney told us we weren't allowed to put any money into an IRA, stock up on items like food or bulk items from Costco (or Sam's) or prepay any regular expenses....so I don't know I guess every district is different but I think we are in a pretty strict district....I guess I am hoping we can file Chapter 13......Chapter 7 seems pretty rigid.....waiting to iron out some tax refund issues and than filing.....keeping fingers and toes crossed

[SunshineGal]

who knows food and gas could be next as considered being assets. .

Oh no...don't give them any ideas Tobee, I can so see our trustee asking that question at the 431 "So, how many gallons of gas did you have on hand the day of filing?" (ROTFL)

As to the IRA, from everything I have read, the FL trustees get mad when your turn non exempt cash into exempt so I would be real careful with that one. I actually read a case where the debtors lost $20,000 in a situation where the money should have been exempt, lost its status, and then was converted back to exempt.

[SunshineGal]

Cavedog,

Just wanted to add that Alper's site is my favorite next to this forum - we would never had made it through without the advice from the two.

[Cavedog]

I love his site. He is a little smaller in person and has Southpark figures in his office! He is one interesting person.

I am being careful with spending the cash we have. Even second guessing extra food purchases. Rather have an extra $1000 in my savings and have to give it up then not be eligible for my Ch 7 which included 2 mortgages, a HELOC, and 62K worth of unsecured debt. As luck would have it my wife's van died today (battery), so there goes $100! 3 year warranty on the new one!

[tobee43]

Oh no...don't give them any ideas Tobee, I can so see our trustee asking that question at the 431 "So, how many gallons of gas did you have on hand the day of filing?" (ROTFL)

As to the IRA, from everything I have read, the FL trustees get mad when your turn non exempt cash into exempt so I would be real careful with that one. I actually read a case where the debtors lost $20,000 in a situation where the money should have been exempt, lost its status, and then was converted back to exempt.

indeed SG, it seems as though this middle district is becoming a bit tough when they, the trustee's office, think anything may be hidden. actually, i think personally, since there has been so many filings, that the court getting out these stories helps to discourage many from filing.

ahhhhh...and i certainly hope food and gas won't be next.

[SunshineGal]

I love his site. He is a little smaller in person and has Southpark figures in his office! He is one interesting person.

I am being careful with spending the cash we have. Even second guessing extra food purchases. Rather have an extra $1000 in my savings and have to give it up then not be eligible for my Ch 7 which included 2 mortgages, a HELOC, and 62K worth of unsecured debt. As luck would have it my wife's van died today (battery), so there goes $100! 3 year warranty on the new one!

While your wife's car is already being serviced, make sure the tech looks it over. Does it need new tires? Maybe brake pads, etc??

As for cash, we had to spend down quite a bit too, none of our puchases were questioned, including a large food purchase at Sam's. It might be a good time to get new glasses, or even Sunglasses...you live in Florida and quality lenses that are optically ground with full protection are important for the health of your eyes. I'm not suggesting you go out and spend $500 on a pair of Gucci's, but Raybans aren't a bad idea. BTW, Lenscrafters offers a 30% discount with AAA, and if you don't already have it, it might not be a bad time to sign up. Do you all need clothes for the summer? Again, not designer purchases, but clothing is an allowable expense. Same goes for home repairs....not upgrades, you don't want to go out and get a new kitchen.

[tobee43]

Cavedog :Florida exemptions improved quite a bit when you go from only 2k to 10k(non-homestead) in personal property exemptions allowed, plus 1K in each of our two vehicles. I have asked our paralegal to get the deal on Orlando's trustee's regarding IRA's.

hope this helps a bit

FLORIDA ASSET PROTECTION - Statutory Exemptions

"Much of the asset protection benefits for Florida residents is contained within the Florida Statutes. These exemptions are available only to people who permanently reside in Florida.

Salary or Wages

Wages, earnings or compensation of the head of household which are due for personal labor or services, including wages deposited into a bank account (provided they are traceable and identified as such) are exempt from garnishment under Section 222.11 of the Florida Statutes. A debtor is head of household if he financially supports someone for whom he has a legal or moral support obligation, such as a spouse, child, or parent. The dependant does not have to reside in the debtor's primary residence. When a husband and wife have a joint judgment debtor only one of the spouses can be head of household.

Life Insurance Policies and Annuity Contracts

Cash value in insurance and all annuities are protected from creditors' claims by Florida Statutes. While a Florida resident is alive, the cash value of any insurance policy he owns on his life or on other Florida residents is exempt from creditors claims. The protection afforded to the cash surrender value of a life insurance policy is only for the benefit of the owner/insured. Death benefits are not protected from the creditors of the policy beneficiary.

Perhaps the most popular financial product for asset protection planning is annuities. Florida courts have liberally construed this statutory exemption to include the broadest range of annuity contracts and arrangements. Private annuities between family members are entitled to the exemption as are the proceeds of personal injury settlements structured as an annuity. Additional protection is available by purchasing international annuities. Particularly, Switzerland and Liechtenstein have laws which guard annuities from attack by creditors for outside countries including the United States

The protection of cash value insurance and annuities extends to proceeds of these assets after receipt. Florida courts have held that funds withdrawn from a cash value insurance policy and annuity payments received by a debtor remain protected after they are deposited in a financial account as long as the funds can be accurately traced back to the exempt assets. The money does not have to be segretated in a separate account so long as it is traceable.

Only annuities issued to Florida residents in Florida are exempt. A current Florida resident who purchased an annuity in another state prior to moving to Florida may find that his annuity is not exempt from creditors when neither the prior state's laws nor the terms of the annuity contract protect the annuity and its proceeds.

Pension and Profit Sharing Plans, IRAs

To prepare for retirement and to defer income taxation more and more individuals direct significant wealth into IRA accounts and other tax qualified retirement plans. In Florida, retirement money not only defers income taxation, but is protected from creditors as well. Florida Statute 222.21(2)(a) provides that any money or other assets payable to participant or beneficiary in a qualified retirement or profit sharing plan is exempt from all claims from creditors of the beneficiary or participant. Florida Statutes specifically include under the protection umbrella pension plans designated for teachers, county officers and employees, state officers and employees, police officers, and firefighters. The debtor's IRAs are exempt from creditors. A 2011 Florida statute expanded the definition of an IRA to include both rollover and inherited IRA accounts.

As discussed further below, IRA accounts must be maintained in a Florida financial institution or branch to be covered by Florida's exemption law

Disability Income

Disability income benefits under any disability insurance policy are exempt from legal process in Florida.

Automobile Exemption

Florida residents may protect up to $1,000 of equity in an automobile. The fact that a debtor need his automobile to go to work does not protect the vehicle from creditors to the extent that the debtor's equity (value less loan amount) exceeds $1,000.

Prepaid College Plans

Florida prepaid college tuition plans and Florida's 529 college saving plan are protected from creditors by Florida Statute 222.22.

Miscellaneous Exemptions

Florida Statutes include several narrow asset exemptions such as professionallly prescribed health aids, qualified prepaid college tuition, hurricane savings accounts, medical savings accounts, and unemployment benefits. A debtor's bank account held in a custodian financial account fo the benefit of a minor child under the Florida Uniform Transfers To Minors Act is also protected from the debtor's creditors because the account is considered property of the minor beneficiary.

Application In Other States

Florida exemptions have no extraterritorial effect. Florida residents cannot export Florida exemptions to protect tangible and intangible personal property located in states other than Florida. Florida residents who work and maintain accounts or other property in foreign states are subject to the exemption laws where that state where work is performed and property is situated. Financial accounts are situated at the branch office where the account is maintained. For example, if a Georgia resident opens an IRA account at a Georgia branch of a national brokerage, and the same person subsequently moves to Florida, the IRA account may not be exempt because it is deemed to be anchored at the branch where it was opened. This person should move the account to a Florida branch of the same brokerage house or to a new broker with Florida offices. "

[LadyInTheRed]

Even if an IRA is exempt, the question is whether moving non-exempt cash to an IRA right before filing BK is going to cause a problem. An attorney here has recommended many times that people invest non exempt cash in an IRA, but he may only do that when the person he is advising is in his state. One attorney (don't remember if it was the same one) once said that investing in an IRA before filing really annoyed the trustee but there was nothing he could do about it. The advise of an experienced local attorney who is familiar with the trustee(s) in your court is the best way to decide whether to invest in an IRA.

[tobee43]

Even if an IRA is exempt, the question is whether moving non-exempt cash to an IRA right before filing BK is going to cause a problem.

and, i agree, actually, if i recall correctly, on the florida petition it asks if you have made any such movement and asks for some type of explanation. i also believe that question referred to a time period of within the past 24 months of the date of filing, but i think that may be property...however, that's just from what i remember from the florida middle district, and, or depending, it could be applicable under #11 which refers to closed financial accounts and that would be within 12 months of the filing date.