Something possibly very stupid.

[dreson]

Hello,

New here. Very glad there is a site like this for assistance. I have a question on something I did that may be something quite stupid. I am hoping to find the right direction to go.
I am in CC debt $100k. I liquidated the rest of my 401k several weeks ago for the amount of $8000. The reason for this was to fund my attorney fees and pay several friends back of money I owed them. There was however, a way to make some quick cash by purchasing a Rolex and flipping it for a quick profit. I withdrew cash, paid for the watch and then had doubts about the customer and decided to return it. The store is now sending me a check. Will I be looked at as a fraud when I deposit this check into my account? I will use the same account to pay my attorney and friends--does this occurrence with the store matter? Should I avoid the entire situation, cash the check elsewhere and then redeposit the cash into the account? Will the payments from the account negate any possible questions or damage to the process? I do know enough about BK to know that 401k funds are not touched--if I wanted to be fraudulent, I could have just waited. Please advise. It is appreciated.

[tobee43]

first, welcome to the forum!!!!

i understand you are worried about "Preferential Payments in Bankruptcy ".....simply wait 90 days and you should be fine. we unfortunately, also cashed in our 401 to pay creditors, however the 401 and all of them are exempt...so, too late, but i'm sorry and so should you be for cashing it in to pay debt.

i understand your moral committment to the people you paid, however, unless you put enough time between your filing date and the date you paid these people it will be considered as perferentail payments and the trustee will go after the moneies. so wait it out is the best advise i can give.

[helpmeout]

You are correct in that 401K is not touched duing a BK. When it is in an actual 401K account. What you did was take an exempt asset and turn it into an asset that the Trustee will likely go after. How will the Trustee go after it? Well, one of the questions that you will be asked is how much money you paid any creditors in the past 90 days. Your friends that you owed money to qualify as your creditors.

Another question that is asked is if you transferred any property in the past 2-4 years. The withdrawal of the 401K qualifies as a transfer of property, the Trustee is going to want to know what you did with that money. And if you think you can hide it, well, I had to provide one year's worth of 401K statements to show that I did not withdraw any money from the exempt asset.

To be honest, you bought a Rolex, thought better of it and returned it. That's not going to raise as many questions (unless you try to hide the refund check like you appear to be asking about) as the $8K withdrawal from your 401K is. Unless you charged the Rolex, that is. Then you may very well still be on the hook for that debt.

You really should stop trying to play the system and consult with a BK attorney. And be HONEST with him/her about all of the above.

[LadyInTheRed]

Welcome to the BKforum. I'm glad you found us. Maybe we can help you keep from making some mistakes.

The transaction with the watch should not be a problem as long as you don't try to hide it. Keep all of your receipts and a copy of the check from the store and make sure your attorney knows about the transaction so it can be properly reported on your petition, if and where it should be. You may have to explain to the trustee what happened.

If you haven't yet paid your friends, don't do so until you learn about preference payments. If the payments are considered preference payments based on their amounts and how soon before bankruptcy you made them, the bankruptcy trustee can go after your friends to get that money back and distribute it among all of your unsecured creditors. You can pay your friends after your discharge.

Was this an early withdrawal from your 401k? If so, I hope you are prepared to pay income tax on the money you withdrew. If the withdraw was made within 60 days, you might want to look into whether you can "roll over" whatever you don't need for attorneys fees into an IRA to avoid early withdrawal penalties and income taxes.

Please don't make any more financial moves or pay off your friends without consulting with an attorney.

[Waited2long]

Lady in Red

I had to take a small early withdrawal to help with paying my property taxes. I am prepared for the penalties and taxes. Otherwise is there any other problem with taking the early withdrawal (less than 2k) and chap 7?

[LadyInTheRed]

Lady in Red

I had to take a small early withdrawal to help with paying my property taxes. I am prepared for the penalties and taxes. Otherwise is there any other problem with taking the early withdrawal (less than 2k) and chap 7?

Aside from my general objection to taking early withdrawals from a 401k, the withdrawal may be considered income on your means test. That's all I can think of at the moment.

If you are keeping the home, start setting aside money each month so you can pay your property taxes every year. It's an expected expense you should be prepared for. If you can't do that, you can't afford your home and should give it up.

[Waited2long]

Aside from my general objection to taking early withdrawals from a 401k, the withdrawal may be considered income on your means test. That's all I can think of at the moment.

If you are keeping the home, start setting aside money each month so you can pay your property taxes every year. It's an expected expense you should be prepared for. If you can't do that, you can't afford your home and should give it up.

Thanks! Keeping the home. Just learning to settle into a cash budget and build an emergency fund.

[Tater]

You are correct in that 401K is not touched duing a BK. When it is in an actual 401K account. What you did was take an exempt asset and turn it into an asset that the Trustee will likely go after. How will the Trustee go after it? Well, one of the questions that you will be asked is how much money you paid any creditors in the past 90 days. Your friends that you owed money to qualify as your creditors.

Another question that is asked is if you transferred any property in the past 2-4 years. The withdrawal of the 401K qualifies as a transfer of property, the Trustee is going to want to know what you did with that money. And if you think you can hide it, well, I had to provide one year's worth of 401K statements to show that I did not withdraw any money from the exempt asset.

To be honest, you bought a Rolex, thought better of it and returned it. That's not going to raise as many questions (unless you try to hide the refund check like you appear to be asking about) as the $8K withdrawal from your 401K is. Unless you charged the Rolex, that is. Then you may very well still be on the hook for that debt.

You really should stop trying to play the system and consult with a BK attorney. And be HONEST with him/her about all of the above.

That's interesting to know about a withdrawal from a 401k is a transfer of property. My husband took less than a $1000 out last September to pay the remaining balance of a new furnace we had to have put in before winter. I will list this on the correct schedule then.

[ValleYum]

That's interesting to know about a withdrawal from a 401k is a transfer of property. My husband took less than a $1000 out last September to pay the remaining balance of a new furnace we had to have put in before winter. I will list this on the correct schedule then.

Taterrrrrrrrrrrrr... what are you paying that shiny, new attorney you just hired for??? LOL!! Let him know about the 401k withdrawal and what you used the money for and let him put it on the correct schedule and add it to your income if necessary (was withdrawn more than 6 months ago so it shouldn't count as income - but let your attorney decide this!).

[Tater]

Taterrrrrrrrrrrrr... what are you paying that shiny, new attorney you just hired for??? LOL!! Let him know about the 401k withdrawal and what you used the money for and let him put it on the correct schedule and add it to your income if necessary (was withdrawn more than 6 months ago so it shouldn't count as income - but let your attorney decide this!).

Actually, hubby mentioned it and she didn't seem too concerned about it since it was over six months ago. I feel like I'm back in school with all this stuff LOL!!

[ValleYum]

I feel like I'm back in school with all this stuff LOL!!

Want to know a secret? One of my first question on this forum was "Who administers the Means Test?" LOLOLOL There definitely is a learning curve during the BK experience!

[Tater]

Want to know a secret? One of my first question on this forum was "Who administers the Means Test?" LOLOLOL There definitely is a learning curve during the BK experience!

OMG, that sounds like something I would ask!

[SMinGA2]

First - do not pay your friends back right now! The 90 day look back applies only to standard 3rd party creditors. For friends and family, the trustee can go back 1-2 years, more if he/she wants to.

I did a basic search of MD bankruptcy exemptions and it looks like you can exempt $6,000 in cash and $5,000 other property as wild card exemptions. Meaning if you have cash on hand when you file, you can protect it by claiming exemptions. Then after discharge, use it if you want to repay your friends. Confirm of course with your attorney, as information on the internet could be out dated.

Regarding the watch, its not a big deal but be prepared to explain should you need to. (You bought a luxury item, decided it was a bad idea, and returned it. Assuming you paid for it with your own funds and not a credit card - should not be an issue. If it was on a credit card, you'll possibly need to pay it back as making a luxury charge close to bankruptcy, when you know you're not likely to pay it back, could be viewed as fraudulent.)

[tobee43]

Actually, hubby mentioned it and she didn't seem too concerned about it since it was over six months ago. I feel like I'm back in school with all this stuff LOL!!

we withdrew our entire 401 and since it was at least 6 months prior to filing we didn't have to list it on any scheudle...no where. however, i do believe there was a question in fact on the petition about it, and we stated we had no receipts and it was all used for food and living expenses and since at the time we didn't know that we were filing for bk, we would have never thought in a million years to keep my grocery receipts or my gas receipts etc. we also used a large chuck of it to pay (dumb move) down bills.

our trustee said absolutely nothing about it and it was a very large amount of money but certainly not put on any schedule as it was 6 months clear. and i don't and never did and never will commit fraud. use the laws to benefit you and not to harm you.

please don't misinterpret that as me saying manipulate the system, i'm just saying use it in your favor that's all.