taking out money from retirement savings account

[ando]

I am about to pull some money from my retirement account. I know I shouldn't do that , but I need the money to pay bills.like medical, dental, car insurance , etc....my lawyer did not return my call when I asked him.should I do it? am I allowed to do it , I haven't filed yet , I am in the process of filing 13 .I will be taking out $5000 to direct deposited in my bank.how much am I allowed to have in my checking since more than half of it will be gone as soon as I receive it. besides the 10% penalty early withdrawal, and later the 20% federal tax .

thank you fellows

[falken]

I am about to pull some money from my retirement account. I know I shouldn't do that , but I need the money to pay bills.like medical, dental, car insurance , etc....my lawyer did not return my call when I asked him.should I do it? am I allowed to do it , I haven't filed yet , I am in the process of filing 13 .I will be taking out $5000 to direct deposited in my bank.how much am I allowed to have in my checking since more than half of it will be gone as soon as I receive it. besides the 10% penalty early withdrawal, and later the 20% federal tax .

thank you fellows

Step 1) Don't do it.
Step 2) Don't do it.

Your medical and dental bills can be included in your 13 plan. If you haven't already, stop paying all your unsecured debt. If you can do a 13 this should give you enough money to pay the things you need to pay (like insurance).

You would get to keep all the money in your retirement account durring and after the 13. If you withdraw it, its gone. And you will owe federal and state taxes at whatever your effective tax rate is. The withdraw may even be enough to push you in to a higher bracket.

[want2save]

I'm new and can't find where I should post and since my question is retirement related I'll post it here. I filed chapter 7 on May 21, 2009. The Trustee has just asked for copies of my retirement account from May 2008 thru June 2009. During that time there were no deposits but one $20,000 withdrawal in July 2008 which I used to keep my bills current. The money was spent long ago. Is this a problem and why would the trustee want these records? Is it to see if I tried to hide non exempt money here? Thanks so much for any responses to my questions!!

[justbroke]

I'm new and can't find where I should post and since my question is retirement related I'll post it here. I filed chapter 7 on May 21, 2009. The Trustee has just asked for copies of my retirement account from May 2008 thru June 2009. During that time there were no deposits but one $20,000 withdrawal in July 2008 which I used to keep my bills current. The money was spent long ago. Is this a problem and why would the trustee want these records? Is it to see if I tried to hide non exempt money here? Thanks so much for any responses to my questions!!

They are looking to see if you took money out (basically converting it from a protected (exempt) account, to non-exempt cash. They may ask you what you did with the money, when they find that you took out a chunk. You just tell them what you did with it. If it was on necessities, you have no worries. This includes, gasoline for your car, any other transportation to earn income, food, clothing, rent/mortgage, medical bills, etc.

Since it was over a year ago, I don't think you'll have any issues, and the Trustee may not even bring it up becuase it was so long ago (the withdrawal).

[Dagg25]

reply

thanks for this information...

[cupcake]

Step 1) Don't do it.
Step 2) Don't do it.

Your medical and dental bills can be included in your 13 plan. If you haven't already, stop paying all your unsecured debt. If you can do a 13 this should give you enough money to pay the things you need to pay (like insurance).

You would get to keep all the money in your retirement account durring and after the 13. If you withdraw it, its gone. And you will owe federal and state taxes at whatever your effective tax rate is. The withdraw may even be enough to push you in to a higher bracket.

Also, whatever money you take out of your retirement account will be considered additional income.

[backtoschool]

Money in retirement accounts is totally exempt so if there is any way not to touch it don't. Once it hits your regular bank account it is no longer exempt and will be part of your income and assets on a means test. You would have to wait another six months to have that extra "income" not be counted as part of your means on the means test.

But that being said, as long as you use it to pay expenses and have receipts for how it was spent, then if it is not going to change your situation on the means test, the trustee isn't going to be able to do much.

[LuciluS]

Just wanted to add, please don't take money from your retirement account. Quit paying your Credit Cards before doing so.

Not only will you have to pay taxes on it, but there are penalties involved if you are not of retirement age. And yes, it will be counted as Additional Income.

[want2save]

Thanks for the responses! I used the money to keep all my bills current including lots of credit cards, waiting for the the real estate market to pick up (real estate broker). Instead the market got worse!!!! I did not deplete what I had left of my IRAS ($84,000) as I am 67 years old, I filed the Chapter 7. I don't have specific receipts as to where I spent the $20,000 I withdrew just over a year ago, but it went to pay the necessary living expenses. This was not a taxable event as income was nothing but Social Security. Hopefully the Trustee understands and accepts that explanation.

[Flowers]

I did it.
I regret it.
I was under the assumption I was supposed to do everything to pay these bills prior to BK.
Please do not . . . .

[Flamingo]

Back in 2001/2002, this forum did not exist and we were in the process of figuring out how to get by with a 70% loss of income in 2/01 and not file BK. We received horrid advice on a now defunct online forum an also on one that was controlled by a troll (didn't know it at the time) and I was given bad advice from that so called "financial expert." We withdrew my husband's 401(k) and to this day kick ourselves for doing so. We used it to also try not to file and pay bills Don't make the same mistake and take the advice given to you on here which is excellent.

[want2save]

IRAs Under Seige!! Help!

I posted that the trustee wanted copies of my retirement statements. Well I went to Pacer and found that yesterday she filed a Trustee's Objections to claimed exemptions. The body of the document states that "This is a precautionary objection. The debtor has not provided the trustee the requested documentation to verify that the exemption applies". Then it goes on to say , in fine p;rint, that the exemption will be disallowed unless I file a written request for a hearing setting forth the specific grounds for such hearing within 22 days. The trustee has not even seen my statements yet!!! I made one withdrawal of $20,000 13 months ago which I used to pay mortgage, food, gas, credit cards, etc. hoping my income would improve. Finally I realized I had to file a chapter 7 and I left the remaining $84,000 untouched. How can the Trustee try to take all my IRA funds which are supposed to be exempt???? I've emailed my attorney but have not heard back yet. I'm 67 years old and living now on social security and am scared to death!!!! She wants statements back 1 year before my filing (May 2009) and I made the withdraw in early July, 2008.

Can anyone help with answers? Thank you....I can't sleep!

[justbroke]

How can the Trustee try to take all my IRA funds which are supposed to be exempt????

Sounds like you haven't proven, by providing statements, that the money is actually in a protected retirement account.

I've emailed my attorney but have not heard back yet. I'm 67 years old and living now on social security and am scared to death!!!! She wants statements back 1 year before my filing (May 2009) and I made the withdraw in early July, 2008.

They generally look back a year to see what's in there. IRAs are protected to $1,095,000.00 if you made direct contributions, or unlimited if they were from an ERISA (employer) rollover. (11 USC 522)

I believe the issue between you and the Trustee is that you haven't provided Statements so that they can validate that the money is actually in an IRA (Roth or regular) or some other ERISA type account. Until then, they must assume it's in a regular checking/saving account and then it would not be afforded the exemption status.

Since the Trustee filed an Objection to Claimed Exemptions with the Court, your lawyer will need to either work with the Trustee to create an Agreed Order (overruling the objection). Or your lawyer will need to attend a hearing and not only mail a copy of the statements to the Trustee, but also bring the Statements with him to enter as evidence that the account is indeed an IRA or otherwise protected account. Sounds like a paperwork issue to me. However, since the Trustee did this through the Court, it now requires a hearing on the matter.

Does that help? So how long has the Trustee been asking for the paperwork/documentation?

[want2save]

Yes, that does help and thank you. The Trustee just asked yesterday for the documents. My attorney just email me and said " if you think there is some reason why you are not required to provide the IRA documents, then you must request a hearing. IRAs are exempt so provide the documents and everything should be fine". Sounds as if I scared myself silly for nothing!!!! Thank you again, so much!!!

[ando]

If I rolled my retirement savings account to a liquid IRA would that be considered exempt?