Can I transfer money to an exemption before bankruptcy?

[maryannie]

We are currently up to date with our minimum payments on our credit cards. We are behind in paying a lot of medical bills that we owe. The only payment we're behind on is one month of mortgage on a rental property that has no equity which we want to get rid of anyway. We also have a business property (convenience store) which we are trying to sell, it hasn't been selling so we drastically reduced the price. We have $50,000 that we paid down on this property. If we were to sell it at the current price, we should be able to get our $50,000 back. We were hoping to file bankruptcy since we are so far in debt right now and can't seem to catch up with our current income. If we do sell our property and get our $50,000 back, can I put that in an IRA or a college fund or some kind of exempt property? Or will that be considered fraud? I get so many different opinions. Also, if we do file bankruptcy, are the bad debt write-offs considered income?

[AngelinaCat]

Welcome to this forum. In order to start aswering some of the questions, it will help to know what state you are in.

As to the $50,000--if you get it-- I believe that you would be able to put it in an IRA. Retirement funds are exempt. I don't know about college funds.

Good luck.

[AngelinaCatHub]

Never to disagree with my wife, but I disagree with that amount I believe IRS limits IRA per individual and married or not. 50K is tough to dispose of as if you had hundreds, not thousands you could buy food, pay utilities ahead, blankets, fuel and other exempt stuff. I would think 50K would be noted. You do need a lawyer for that question. 'Hub

[maryannie]

I'm in Wisconsin. I talked to two different attorneys and they say two different things. I guess I need to talk to more. So far though, we haven't sold the business yet so we'll just have to wait and see. I am concerned about my rental property which I missed last month's payment, how long will it take before the bank starts taking steps on that? I don't want the property anyway, whether I file for bankruptcy or not. I just don't want them to foreclose and if I am somehow able to not file bankruptcy, then I can do a short sale.

[ssdsco]

You have a complicated BK situation.....business, rental property, potentially significant asset to protect. That requires a good BK attorney and I'd recommend an attorney that is also a trustee. Continue the attorney interviews. Read though the forum. Become an expert on your situation.

Depending on the Wisconsin exemptions and if you get the $50k you may have to delay filing. You could divide the $50k up into 3 parts and put it in a retirement IRA over the next 15 months and then file....2008, 2009, January 2010 and file BK. If Wisconsin has a $50k+ homestead exemption you might be able to dump the money there and file. Some state exempt annuities and trusts with certain stipulations.

[gymbo]

I'm in WI, we are allowed to use Federal Exemptions -I don't know the exact numbers but .. I believe the max is around $40k for homestead.

[fltoo]

I had some money from the sale of my business assets that I wanted to put in a SEP retirement account and it was much less than 50 grand.
I asked the lawyer and he said I should not do it. He didn't say no, just advised me not to. This lawyer is very cautious, though.