How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Phillips Esq. Your Own Question

Phillips Esq.
Phillips Esq., Attorney-at-Law
Category: Bankruptcy Law
Satisfied Customers: 12825
Experience:  B.A.; M.B.A.; J.D.
Type Your Bankruptcy Law Question Here...
Phillips Esq. is online now
A new question is answered every 9 seconds

I live in Colorado. I recently resigned from Federal service

Resolved Question:

I live in Colorado. I recently resigned from Federal service and I have two 401(k) loans (residential and general purpose) outstanding (unpaid). I plan to file for bankruptcy in 6 months when I meet the bankruptcy means test requirements. I realize that if I do not repay the two 401(k) loans within 90 days, the unpaid loan balances will be treated as a taxable distribution and I will have to come up with the money to pay the taxes at the end of the year.

I realize my 401(k) monies are exempted under Chapter 7 bankruptcy. My question is if I immediately sell personal property to pay back the 401(k) loans before the 90 day expiration date, will those paid funds still be protected under bankruptcy and not counted towards my personal property exemptions?

Also, I have stopped making payments on unsecured credit cards. Is it possible or likely that a creditor could sue me and get a financial judgment and seize my bank accounts before I can qualify for bankruptcy and get asset protection from an automatic stay?

My last question is should I continue to make payments to secured loans (house, cars, etc.) in the 90 days before I file bankruptcy. I realize I will have to submit forms that show payments made to creditors 90 days before I file for bankruptcy. I am not sure if this shows favoritism to preferred creditors.

Thanks.

Terry
Submitted: 11 months ago.
Category: Bankruptcy Law
Expert:  Phillips Esq. replied 11 months ago.
Thank you for giving me the opportunity to assist you. Kindly use CONTINUE or REPLY button to ask for clarification or follow-up questions.



I live in Colorado. I recently resigned from Federal service and I have two 401(k) loans (residential and general purpose) outstanding (unpaid). I plan to file for bankruptcy in 6 months when I meet the bankruptcy means test requirements. I realize that if I do not repay the two 401(k) loans within 90 days, the unpaid loan balances will be treated as a taxable distribution and I will have to come up with the money to pay the taxes at the end of the year.

I realize my 401(k) monies are exempted under Chapter 7 bankruptcy. My question is if I immediately sell personal property to pay back the 401(k) loans before the 90 day expiration date, will those paid funds still be protected under bankruptcy and not counted towards my personal property exemptions?



Response 1
: Yes. Also, your payment would not fall under preference payment since you are paying back to yourself technically and not to a creditor. See 11 U.S.C. Section 547

Also, I have stopped making payments on unsecured credit cards. Is it possible or likely that a creditor could sue me and get a financial judgment and seize my bank accounts before I can qualify for bankruptcy and get asset protection from an automatic stay?



Response 2: It is not likely. When you are delinquent, the creditor would first make phone calls and then transfer the debt to a collector usually after 6 months after attempting to collect from you with no success, it could be longer. The collector would make numerous attempts to scare you into paying. If the collector is not successful, usually the account is transferred to another collector to attempt to collect the debt. The creditor may at that time authorize the collector to file a lawsuit if the collector has not been successful into scaring you to pay. Also and more importantly, even if the creditor files a lawsuit, it would take more than six months for the creditor to obtain a Judgment against you IF YOU FILE RESPONSE TO THE COMPLAINT. After Judgment, the creditor would attempt once more to get you to pay and if you do not pay, the creditor would file Application for your Examination as to your ability to pay. You need to make sure to show up for this hearing. If you show up, you can continue the case for three or four months, another three of four months, etc., if you continue to show to creditor’s Attorney at the Courthouse that you just cannot afford to pay. However, if you do not show up, the Court would issue a capias on you—the Court would issue a warrant for your arrest to secure your attendance at next hearing on the case. If you do not show up again, the Court would then issue garnishment Orders at that time if the creditor knows about your employment, bank accounts, or other assets that are not exempt. So, there are so many steps to getting a Judgment and then a garnishment/levy that would give you the needed time to file for bankruptcy protection and prevent the creditor from reaching your assets.


My last question is should I continue to make payments to secured loans (house, cars, etc.) in the 90 days before I file bankruptcy. I realize I will have to submit forms that show payments made to creditors 90 days before I file for bankruptcy. I am not sure if this shows favoritism to preferred creditors.


Response 3: if you want to keep the cars, house, etc, it is imperative that you continue to make the payments. Otherwise, the lender can foreclose on your house or repossess your cars. The payments to these secured creditors eventhough made during the 90-day preference period would not be subject to preference challenge by the Trustee because you are paying them to keep the house, to keep the car. The payments to these secured creditors would fall under preference exceptions. See 11 U.S.C. Section 547(c)

Phillips Esq., Attorney-at-Law
Category: Bankruptcy Law
Satisfied Customers: 12825
Experience: B.A.; M.B.A.; J.D.
Phillips Esq. and 3 other Bankruptcy Law Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
< Last | Next >
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
  • My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer. Eric Redwood City, CA
  • I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight. Michael Wichita, KS
  • PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent. Three H. Houston, TX
  • Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!! Elaine Atlanta, GA
  • It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem. Tony Apopka, FL
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
 
 
 

Meet The Experts:

 
 
 
  • FiveStarLaw

    Attorney

    Satisfied Customers:

    3203
    Bankruptcy Lawyer. Experienced.
< Last | Next >
  • http://ww2.justanswer.com/uploads/FL/FLAandNYLawyer/2012-1-27_14349_3Fotolia25855429M.64x64.jpg FiveStarLaw's Avatar

    FiveStarLaw

    Attorney

    Satisfied Customers:

    3203
    Bankruptcy Lawyer. Experienced.
  • http://ww2.justanswer.com/uploads/TL/tleeders/2012-6-13_204815_TSL1.64x64.jpg Terry L.'s Avatar

    Terry L.

    Attorney

    Satisfied Customers:

    2204
    Better Business Bur 15yrs bankruptcy experience. Chicago Bar
  • http://ww2.justanswer.com/uploads/mnphillips2/2009-03-13_203105_10984459-249293407.jpeg Phillips Esq.'s Avatar

    Phillips Esq.

    Attorney-at-Law

    Satisfied Customers:

    950
    B.A.; M.B.A.; J.D.
  • http://ww2.justanswer.com/uploads/CO/cortrightlaw/2011-12-5_4117_Kevin.64x64.JPG cortrightlaw's Avatar

    cortrightlaw

    Attorney

    Satisfied Customers:

    490
    Attorney practicing Bankruptcy Law including Chapter 7, Chapter 11, Chapter 12, and Chapter 13.
  • http://ww2.justanswer.com/uploads/Jay1968/2006-12-03_004423_JoeRossPhoto.jpg JoeLawyer's Avatar

    JoeLawyer

    Attorney

    Satisfied Customers:

    376
    Attorney in the practice of Bankruptcy Law since 1996
  • http://ww2.justanswer.com/uploads/DY/Dylatess/2012-9-11_1968_BHBTemplePhoto.64x64.jpg dylatess's Avatar

    dylatess

    Attorney

    Satisfied Customers:

    370
    35 plus years of experience specializing in bankruptcy law
  • http://ww2.justanswer.com/uploads/US/USLawAnswers/2012-9-20_23143_20090105211638Headshot3b.64x64.jpg Brent Blanchard's Avatar

    Brent Blanchard

    Bankruptcy Attorney

    Satisfied Customers:

    315
    Twelve years experience in all aspects of debtor & creditor BK.