If you are considering filing bankruptcy, consult an experienced bankruptcy attorney before you liquidate your pension funds.
As soon as you withdraw the funds from your pension and either spend the money or deposit it in another non-pension account, these monies are no longer exempt.
In a recent case, a husband liquidated his $36,500 pension fund as follows:
- Taxes for premature withdrawal $8,500
- Gift to church $4,000
- Gift to Wife $5,000
- Bought a car $3,900
- Paid a debt $1,000
- Retainer to his attorney $3,000
- Balance that he could not account for: $6,100
The Debtors did not disclose this in their Chapter 7. The Judge denied both the husband and wife’s discharges. Wife did not disclose the $5,000 gift from her husband and the husband did not disclose the withdrawal and all that was spent. In addition, the husband could not account for $6,100.
The Debtors should not have taken these withdrawals from their retirement savings before filing for bankruptcy. However, had they been honest, an attorney may have been able to argue that there were no fraudulent transfers because the money they spent was pension funds that were beyond the reach of creditors.
The $36,500 were all considered fraudulent transfers. – Both bankruptcy discharges were denied….