Converting Non-Exempt Assets to Exempt Assets (Retirement Accounts)/ Time Frame

[easymoney]

Hi everyone,

I am considering a chapter 7 bankruptcy sometime within the next 6 to 12 months. I have flexibility on the dates- I can file it later than 12 months if necessary.

I am interested in contributing as much money as possible into and IRA account. Do I need to be concerned in regards to the timing of contributions and the filing of a chapter 7 bankruptcy? I keep hearing that it should generally be between 6 and 12 months before a bankruptcy filing. Should I also be concerned with the amount of the contributions or does it not mater? Any thoughts?

Best regards,

Easy Money

[harvey66]

Bump. I'm interested in the answer too. Also how much time after discharge they would come after you if you had to make an emergency withdrawal from the IRA/401k.

[StartingOver08]

I found an article that discusses what the Trustee looks for when you are converting non-exempt assets to exempt assets. There are apparently "badges of fraud":


Courts will look at what is referred to as "badges of fraud" in determining whether a conversion of non-exempt assets to exempt was made with fraudulent intent. Commonly identified badges of fraud, in the exemption planning context, include: (i) nondisclosure or concealment of the transfer(s) related to the conversion or of the exempt asset; (ii) effecting a conversion right after the debtor had been sued or threatened with suit (or had a judgment entered on the suit); (iii) a conversion of substantially all of the debtor's assets; (iv) a conversion of more than what the Court might conclude what was reasonable or necessary in the context of the debtor's situation (the "hogs get slaughtered" test); (v) engaging in what appears to be economically irrational transfers in order to create exempt assets; and (v) using borrowed funds or the proceeds of the sale of non-exempt assets to acquire exempt assets.

http://www.katzlawoffice.com/bankr/z04_exemptions.html