Annuities and ch.7

[rogue22]

My wife and I will be filing ch.7 in a few months, but have a question regarding annuities.

I have two seperate annuities with combined value of about $20,000. Under florida law, these annuities are exempt during a bankruptcy. Furthermore, I have found out that any cash received from the annuity, whether it be a monthly interest payout or cash surrender, is exempt from a judgment as well as long as you deposit it into a checking/savings account and keep a paper trail to prove it... Although I suppose if you just cash it, it would be ok too? How would the judgment creditor even know that I took a partial withdrawal for example? IRS wouldn't till the end of year when the annuity company sends in the tax paperwork.

So my main question is, if the cash is exempt from a judgment, is it exempt from a ch.7?

[sunshinepa]

You would have to keep the annuity in a separate account unless you want to rish garnishment and then having to prove those were the only funds in the account. Don't mix it with any other funds if in fact, that is Florida law.

As to the CH 7 question, didn't you already answer that in your post??? Not that I know the answer, but is did seem that's what you were saying in the first sentence????

[AngelinaCatHub]

My wife and I will be filing ch.7 in a few months, but have a question regarding annuities.

I have two seperate annuities with combined value of about $20,000. Under florida law, these annuities are exempt during a bankruptcy. Furthermore, I have found out that any cash received from the annuity, whether it be a monthly interest payout or cash surrender, is exempt from a judgment as well as long as you deposit it into a checking/savings account and keep a paper trail to prove it... Although I suppose if you just cash it, it would be ok too? How would the judgment creditor even know that I took a partial withdrawal for example? IRS wouldn't till the end of year when the annuity company sends in the tax paperwork.

So my main question is, if the cash is exempt from a judgment, is it exempt from a ch.7?

You are absolutely right about the annuity. We have a Charitable Trust that we get a pay out on. It is an annuity.

As to cashing it in, it becomes the property of the estate, and then to hide it, THAT IS FRAUD. Big red flag on that idea. 'Hub

[rogue22]

Sorry for not clarifying Sunshinepa.. In the first sentence i meant that an annuity is exempt to keep the money in the annuity. I just wasnt sure if it was exempt to take some of the money out right before a ch.7.

[sunshinepa]

No problem.

I personally would not cash that annuity. The judgement creditor may not know but you will have to count as income for filing BK.

[AngelinaCatHub]

No problem.

I personally would not cash that annuity. The judgement creditor may not know but you will have to count as income for filing BK.

Right on. Where it is, is the safest place. Pulling it all out and hiding it is considered evading or hiding an asset both from the collection of a Judgment as well as BK if you are going to file. The normal proceeds cannot be levied upon, and the proceeds in bulk (as in closing it out) would be income. 'Hub

[rogue22]

So I asked this same question on avvo.com (lawyers answer your questions for free) and 2 lawyers said the annuity payout from monthly interest or a partial withdrawal would be considered "other income" on the means test for ch.7. However, a third lawyer responded with this answer:

"Your means test is based off your last six months of income. The annuity payout is typically an exempt asset. Florida statutes, and Florida case law, also exempt annuity proceeds even after the annuity proceeds are received and deposited in a financial account. The annuity and the proceeds would be exempt if the debtor filed Chapter 7. However, this does not address any adversarials, fraudulent transfers, or other claims that creditors could bring."

This would make sense if the annuity as a whole is exempt in a ch.7, why wouldn't a partial payout from it be exempt then? Yes its technically income, but its coming from an exempt source.

The first and third lawyers to answer the question we bk attorneys, while the 2nd lawyer didnt have much experience in bk according to his profile. It seems like every lawyer has a different answer... guess the laws are confusing to them too!!!

[rogue22]

Just found this:

222.14 Exemption of cash surrender value of life insurance policies and annuity contracts from legal process.--The cash surrender values of life insurance policies issued upon the lives of citizens or residents of the state and the proceeds of annuity contracts issued to citizens or residents of the state, upon whatever form, shall not in any case be liable to attachment, garnishment or legal process in favor of any creditor of the person whose life is so insured or of any creditor of the person who is the beneficiary of such annuity contract, unless the insurance policy or annuity contract was effected for the benefit of such creditor.