IRAs are exempt from bankruptcy, but what if someone deposited a large amount in IRA?

[geoffois]

If for example a person deposited $5k into an ira since that is the maximum allowed before april 15th to be able to get it deducted from last years income. If that person needed to file chapter 7 maybe a year later, would the trustee(judge) see that and possibly not grant ch7 because a year before the person had $5k in cash?

[HHM]

Usually not a problem.

[geoffois]

thank you

Usually not a problem.

I just did a search and found a discussion where someone said they deposited 5k then a week later filed bankruptcy. They said the trustee wasn't happy, but he didn't say anything, just that he wasn't pleased by it.

A 401k is exempt also, so If someone deposited the maximum amount like 20% into the 401k from the beginning of being hired, whatever is already in the 401k should be safe and untouchable right? I would only think they might not permit 20% to be placed in the 401k account going forward while trying to get bankruptcy.

[outofdebt201]

[geoffois]

I think you are right.

That sounds correct. I also found out that one can put a maximum of $16,500 into a 401k per year. If you are over 50 you can do some more I think. I thought I read that one can't do both though. I don't think I can do IRA $5k and $16,500 into a 401k in the same year. If anyone knows I would like to know for sure.

Thank you outofdebt

[keptdigging]

I think I read a court decision that blessed this as long as you were entitled to make the contribution... and didn't borrow the money!

[doudis2]

Different in AZ

Hi,

Check your states exemptions as it is different in AZ. True 401k and IRA contributions are exempt, EXCEPT for those contributions made within the past 120 days.

I'm currently waiting to file because of this. I paid back a 401k loan once I seen that using it to live on until things improved was a BAD idea. Anyway it is really not a contribution to pay back a 401k loan technically, but my lawyer recommends waiting out the 120 days just to be sure. There is no clear case law on this situation.

Good luck.

[AngelinaCatHub]

That sounds correct. I also found out that one can put a maximum of $16,500 into a 401k per year. If you are over 50 you can do some more I think. I thought I read that one can't do both though. I don't think I can do IRA $5k and $16,500 into a 401k in the same year. If anyone knows I would like to know for sure.

Thank you outofdebt

If they are different accounts is should not matter. 'Hub

[geoffois]

Yeah, maybe you are right also

If they are different accounts is should not matter. 'Hub

It is really for tax deduction reasons that one is only allowed to do a maximum of 16500 into a 401k and then not be able to do the ira also, but I am wondering about for protective reasons. Someone told me just put money in a roth ira. So tax deductive reasons aside, the real question for bankruptcy is, is all money placed into 401k and ira and roth ira protected? I've never heard of 120 days not being protected, but maybe he is referring to what they look at as far as income and payments not so much that they can take what you invested in the last 120 days.

[doudis2]

[geoffois]

Nice

$150000 for homestead is really good. It is only $75000 for a single person in CA. One would think with the high price of real estate here it should be at least the same as AZ.

[blockhead]

Homestead exmeption in MA

is $500,000!

[scla]

IRA contributions and Exemptions

You should check first of all your state bankruptcy exemptions to ensure that there are no issues that would limit your ability to contribute to your IRA prior to filing for BK. In most instances contributing the allowable amount into your IRA account should not pose a problem. Most state bankruptcy exemptions protect amounts in pensions, retirements and 401K's.