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cfortunato, Attorney
Category: Bankruptcy Law
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Experience:  Bankruptcy professor.
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Question for Bankruptcy Attorney Hello, I am planning to

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Question for Bankruptcy Attorney
Hello, I am planning to declare bankruptcy in about 6 months from now.
I owe about $250K to a bank for a foreclosed property, where the outstanding balance has not been forgiven.
I have about $27K in the bank and am trying to spend it down.

Do you think the following two actions can raise questions in the bankruptcy court? And if so, can my 401K and IRA accounts be penetrated by a bankruptcy trustee?
I am currently automatically putting away as much as 70% of my earnings into my 401K account, and living off of the money in the bank.
I am also planning to put away about $5K into an IRA account, to lower my bank checking account balance.
Thank you in advance.

cfortunato :

Hi - my name is XXXXX XXXXX I'm a Bankruptcy attorney here to assist you.

cfortunato :

Debtors who are considering filing a Bankruptcy are allowed to engage in ''pre-Bankruptcy planning''.

cfortunato :

This can include converting non-exempt assets (such as a bank account) in exempt assets (such as a retirement account).

cfortunato :

Doing this type of conversion will not allow a Bankruptcy trustee to take the money out of the exempt retirement accounts.

cfortunato :

This is something that is done often, and will not result in the raising of questions by the Bankruptcy court.

Customer: Hi. Thanks for answering. Unfortunately, I can not view your answer as the chat feature does not work for me. Could you please repost? Thank you in advance.
cfortunato and other Bankruptcy Law Specialists are ready to help you

I just switched out of chat mode.

Please let me know if you still cannot see the answer.

Thank you!

(Typo: The word 'in' in the middle of the third sentence should be 'to'.)

Customer: replied 3 years ago.
Thank you.I am able to view the answer. Do you think that putting away as much as 70% of my earnings will look as a reasibable savings for my retirement at the age of 31, though?
There is no limit to the amount of funds you can deposit into a tax-deferred retirement account - as far as the Bankruptcy court is concerned.
There may be a limit, however, to the amount per year that you can deposit into your retirement account - per IRS rules.
As long as the total amount you deposit does not go over the yearly limit set by the IRS, the Bankruptcy court will not have an issue with the amount - even if it is 70% of your earnings
cfortunato and other Bankruptcy Law Specialists are ready to help you

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