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Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36714
Experience:  Bankruptcy Lawyer. Experienced.
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we filed a chapter 7 bankruptcy in October 2009. In March 2009

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we filed a chapter 7 bankruptcy in October 2009. In March 2009 we took $15,000 from an annuity/insurance account and paid two prepaid college funds for our daughters. The trustee's attorney is now asking for that money since it was deposited in our checking account he claims it was non exempt since it was in the account from March 19 to April 16. Is this true? Can he ask fo this money? We have receipts that we paid the college plans and dont have the money.
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  Ellen replied 7 years ago.

I am the JustAnswer expert that will be helping you today. I am a lawyer with 25 years experience. Although I am not your attorney, I hope that I can give you helpful legal information.

How unfortunate. The annuity/insurance account and the prepaid college would typically be exempt from claims of creditors. However when you deposited the annuity/insurance funds into a regular bank account, they lost their exempt status. This would allow the trustee to claim that you transferred nonexempt assets to exempt assets in order to defeat the creditors claims.

I would suggest that you retain local counsel to challenge the trustee's findings on the basis that you are engaging in proper bankruptcy planning and not fraud.
Customer: replied 7 years ago.
there would be no other way to pay the college fund - the check was issued in my husband's name and we have to write two checks to pay each girls account - how else could be have done this but to deposit the insurance check - wait for it to clear - then issue a check for payment. Even if we went to a check cashing place, as soon as the check as cashed it would be nonexempt cash - the bank would not give us the money without depositing it for clearance first. How could he claim we are hiding money from creditors when it was done well in advance of the decision to file the bankruptcy in October.
Expert:  Ellen replied 7 years ago.
I understand this and it is a valid argument. I was explaining the trustee's position to you. You will want to retain local counsel to object to the trustee's claim
Customer: replied 7 years ago.

How long can a Trustee go back to take money from your bank accounts? I thought it was six months. This seems like a petty way to get more money/assets from us because he could not have touched it if we left it in the insurance account. If we wanted to hide it from creditors and use it ourselves we could have taken out the money after filing. Since we have receipts to show we paid an exempt account - how is it even possible to say we were hiding it from creditors? It seems unfair that he can go back this long - plus we held onto the money for such a short time.

Expert:  Ellen replied 7 years ago.

Bankruptcy Code §548 provides for the avoidance of fraudulent transfers within two years before the bankruptcy filing date. Transfers to self settled trusts and similar devices are subject to a longer avoidance reach back (10 years).
Customer: replied 7 years ago.
does it matter how long the money was in the checking account or just that once it hit the bank account it became nonexempt. our attorney is telling us that since we waited a couple of weeks to pay the college fund after the check was deposited it makes a difference but I dont see why. we deposited in on 3/19, the bank waited 7 working days to clear it and we issued a check on 4/16 that was cashed on 4/22.
Expert:  Ellen replied 7 years ago.
Not all attorneys handle bankruptcy litigation. You will want to ask your attorney if he has experience in bankruptcy litigation and is prepared to defend your claim.
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