Profit Sharing, 401k's, and Bankruptcy

[Ayrd]

My question involves bankruptcy in the state of: Massachusetts.

At this point filing bankruptcy is pretty much a certainty. I've sorted through a lot of the forms and it all seems pretty straight forward. One question I have though is how to handle money that is in flux. My wife left her job a several months ago and is entitled to her profit sharing. She has received a letter stating that she can either take the money or roll it into an IRA. If she takes the money she will be hit with a tax penalty, if she rolls it over I'm concerned the bankruptcy trustee will see it as trying to hide the funds.

My other concern is that, if we take the profit sharing, the tax penalty will be taken when we file our taxes. This would mean that the bankruptcy would have taken all of the money and we won't have the percentage to pay the tax.

She also has a 401k from the company (another profit sharing that was rolled over into the 401k when the current current company bought out the preceding company). She has received a letter stating that either she can transfer into a 401k of her choice or they can continue maintaining it for a fee. As I understand it, this money is already in a 401k program so it shouldn't be subject to any bankruptcy takings, however, she would like some conformation as to whether or not transferring the funds will cause a problem or should we just leave it where it is and allow them to continue maintaining it?

Thanks for any advice you can give.

~Ayrd

[PattyPA]

What does your bankruptcy attorney say about this?

[Ayrd]

Nothing, at the moment I'm handling it myself. I've been considering contacting one, but so much of it seems straight forward that it seems a waste.

[PattyPA]

I would never do this without an attorney.

[Ayrd]

I'm not sure what the point of asking questions on a forum is if I had one. Shouldn't they be able to answer any question I might have? Thanks for the suggestion though, I'll consider it.

[PattyPA]

If someone knows the answer, they will post it. I am not a bankruptcy attorney.

[acip4u]

If someone knows the answer, they will post it. I am not a bankruptcy attorney.

I am not a lawyer but you should definetly hire one, but to answer your question i believe that all retirement money is exempt and would not be considered fraud!



God Bless

[Mr. Knowitall]

Rolling over retirement accounts does not create an issue. You can potentially create an issue by funding retirement accounts in an amount greater than you normally would in the time leading up to bankruptcy, in order to shield the money from creditors, but that rule is about new contributions (not rollovers from one exempt retirement plan to another).

[BkAttyMI]

Bankruptcy law is complicated and one error or missed deadline can hurt you, hire an attorney that knows what they're doing.

[PattyPA]

Bankruptcy law is complicated and one error or missed deadline can hurt you, hire an attorney that knows what they're doing.

My point exactly.