Selling stocks before BK?

[AZNoName]

I have about 3K in stocks and I plan to file Chap 13 within the month. Is there a legal way to use this money before I file? (i.e. move to IRA or 529 Savings plan)?

[justbroke]

I have about 3K in stocks and I plan to file Chap 13 within the month. Is there a legal way to use this money before I file? (i.e. move to IRA or 529 Savings plan)?

Asset protection is a very touchy and very disciplined area of pre-bankruptcy planning. It is likely that if you take $3K in non-exempt assets and move it to an exempt asset, the Chatper 7 Trustee will complain.

However, we're not talking about a Chapter 7 here!

In a Chapter 13, you can actually keep that stock where it is -- or move it if you like! That's right! You get to keep non-exempt assets in a Chapter 13 if your plan provides that your unsecured creditors received at least as much as they would have in a Chapter 7 liquidation of the non-exempt assets! In other words, if your DMI is at least $50/month for 60 months -- which is $3,000 -- then you get to keep the non-exempt asset!

Chapter 13 is so much more fun. However, your plan must be feasible and you must commit that DMI to pay the value of the non-exempt assets or face objection to confirmation.

[AZNoName]

I have no wish to keep the stocks and pay for the value in the Chap 13 plan. I'd rather roll it into an investment if possible

[justbroke]

You may not have that choice. Please consult an Asset Protection attorney that specializes in bankruptcy. You may already NEED to pay the value due to your disposable monthly income (DMI) in the Chapter 13. In that particular case, your DMI is over $50/month for 60 months, you wouldn't be paying any more than if you had not had the asset!

[despritfreya]

I have no wish to keep the stocks and pay for the value in the Chap 13 plan. I'd rather roll it into an investment if possible

Under Arizona law, any contribution to a retirement plan (IRA for example) within 120 days prior to filing a bk can be set aside and/or must be accounted for in the context of a Chapter 13.

Under bk law, any contribution to a 529 plan within 1 year prior to filing can be set aside and/or must be accounted for in the context of a Chapter 13.

There may be one other "investment" vehicle (pre paid funeral expenses) but I don't know the details. Other than that there are no other "investments" covered by any Arizona exemptions.

Des.

[AZNoName]

That would be wonderful. I would love to be able to put money away for my kids college expenses! I contacted my atty and am waiting to hear back on an official word before I proceed. Thanks for your insight!

[LadyInTheRed]

That would be wonderful. I would love to be able to put money away for my kids college expenses! I contacted my atty and am waiting to hear back on an official word before I proceed. Thanks for your insight!

I suspect you don't know what "set aside" means. Setting aside a contribution means deeming it as having never occurred. So, if you used $3,000 to start a 529 plan within 1 year prior to filing a Chap 13, that contribution would be part of your BK estate and your Chap 13 plan would have to pay at least $3,000 to your unsecured creditors. As already pointed out, that $3,000 is not in addition to the DMI that will make up your Chap 13 plan payment whether or not you have non-exempt assets. Depending on your situation, the $3,000 asset may make no difference to your plan payment.

[AZNoName]

Yeah, I ended up reading something on that about 20 minutes ago. yuck. Anyways, I'll just wait it out until I hear from my atty.

[AZNoName]

Moving this stock at all before the BK has me kind of freaked. Right now, i make $50/mo payments into my kids 529 plans. If i keep my stocks where they are, my payments on that asset would be roughly $50/month anyways. Maybe it would be better to stop making deposits into my kids 529 plan and just include the 3K stock value as non-exempt in the BK, and then sell the stocks after the BK while i'm in the 5 year payment plan? Can you cash out or sell stocks while you're in the 5 year plan? If you are paying for their value anyways, I can sell them if I want, correct? Then I could move that money into the 529 plans and it would be a wash?

[AZNoName]

Per my atty, in case yall are interested

You can move those to an IRA but it has to be done 120 days before you file bankruptcy. There are other things you can spend it on that don’t have a waiting period prior to filing, just keep the receipts. Maintenance on a house, you can pre pay 6 months of your electric bill. You can have 6 months worth of food and other household provisions. If your vehicles need maintenance you can get that work done also. You can pay your attorneys fees with it also.

[momofthree]

Can you cash out or sell stocks while you're in the 5 year plan? If you are paying for their value anyways, I can sell them if I want, correct?

Just an FYI. Most confirmation orders require that you obtain trustee permission to sell any asset worth over $500. It doesn't matter if it was exempt when you filed, you still have to get permission to sell it. If you want to sell something, sell it before filing. It is a major pain in the patootie to get the permission, especially if your attorney charges extra to file those types of requests for you (it's done by motion here).