Bankruptcy Law Questions? Ask a Bankruptcy Lawyer Now.
Why is the Bankruptcy court entitled to your 401K money, which is normally exempt property?
I had closed my 401K account to pay my mother back before the filling. The court seems to have looked at this like we were crooks, how we felt. So many things were done like don't worry this is a slam dunk. We were to understand that our 401K was exempt now we find that this is not true after it took place.
Once money is taken out of a retirement account, it is no longer exempt.
However, if the money was given to your mother, how is it that taking it back from your mother to pay your other creditors will result in your being "left with absolutely no money"? Isn't it actually your mother who will be left with no money?
Sorry, that is correct, The amount is $44,000 dollars. This is made up of my severance pay in June of $17,000 and the balance is my 401K.
Once money is taken out of a 401K plan, it is no longer exempt. That is the reason the court was able to take the money back, treating it as a preferential transfer.
You can file a motion to dismiss the case. This motion may and may not be granted, but there is usually the opportunity to reach a settlement agreement in the midst of the motion, allowing the debtor to pay less (often half).