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Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2897
Experience:  Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.
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In april I received 21,000 as a 72(t) distribution from a rollover,

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In april I received 21,000 as a 72(t) distribution from a rollover, Traditional IRA. In September I filed Chapter 7 on $39,000 unsecured debt.(The bankruptcy is a result of becoming disabled and caught up in a 2.5 year ssdi process). What can the trustee do to my IRA? Please help.
The withdrawal from the IRA is income that should be disclosed on your means test calculation first of all, since it was within the 6 months leading up to the case.

Also, if you have that money in the bank, it is subject to liquidation by the trustee, since there is no available exemption to protect cash. If the funds were spent down before the case was filed, and spent on necessities, those would be fine and not at issue. if the funds were in the bank when filed, then the trustee can liquidate them to pay your unsecured creditors in the case.
Customer: replied 7 years ago.
Thank you. Just for clarification: The funds were gone by May because I had fallen behind on house and car payments. So, I think you're saying the trustee cannot penalize me for those spent funds. But my real question is, can the trustee take any funds from my IRA or take next April's 72t distribution?
If you spent them on reasonable and necessary items, then you should be ok. the trustee can reverse preferential payments to any one creditor that was more than $600 in the 90 days before filing. I have never seen them go after money paid to arrears for a house or car though, so you should be ok.
Money that is in an IRA is exempt, so that is protected, and they won't be able to go after your next distribution.
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