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The 8th Circuit Court of Appeals has ruled that retirement funds rolled over from an Individual Retirement Account to purchase an annuity are exempt from the bankruptcy estate. In re Miller (No. 13-3682). Prior to filing bankruptcy, Joseph Miller, rolled over $267,319 from his IRA account to purchase an annuity contract from Minnesota Life Insurance Company. The annuity was to pay the debtor $40,497.95 for the next 8 years. Although it is clear that funds held in IRA accounts are exempt, the trustee argued that the funds lost that protected status when the annuity was purchased because the annuity did not meet the tax qualification rules of Internal Revenue Code Section 408.
Section 522(b)(3)(C) of the Bankruptcy Code provides that funds which are exempt from federal taxation are thereby made exempt from the claims of creditors. Such funds are not part of the “bankruptcy estate.”
The Chapter 7 Trustee in Miller argued that the rollover of funds from the IRA account exceeded the $6,000 annual premium limit imposed by IRC 408(b)(2)(A), and hence the fund were no longer exempt from taxation or protected in bankruptcy. The 8th Circuit rejected this argument by pointing out that there is a difference between a “rollover contribution” and a “premium payment.” The Court ruled that “a rollover contribution is distinct from a premium.”
In a similar case, the Massachusetts bankruptcy court also ruled that funds rolled over to an IRA annuity are exempt from the bankruptcy estate under 522(b)(3)(C). In re LeClair, 461 B.R. 86 (Bankr. D. Mass. 2011).
Important facts about IRA Accounts in Nebraska Bankruptcy Cases:
- In addition to the federal retirement exemption statute of 522(b)(3)(C), Nebraska has its own exemption statute protecting retirement funds. Neb. Rev. Stat. 25-1563.01. So, if the federal exemption does not apply it may be possible to protect the retirement account under Nebraska’s law.
- Inherited IRA accounts are not protected in bankruptcy.
- IRA accounts which allow the debtor to borrow against the account may be at risk in bankruptcy.
If in Doubt file Chapter 13:
Sometimes it is difficult to determine if an account is exempt from federal taxation and, as a result, whether the account is protected in bankruptcy. Debtors with sizable retirement savings simply cannot risk losing those funds in Chapter 7. Keep in mind, Chapter 7 trustees are paid on commission–they earn bonus income if they uncover unprotected assets worth selling. If there is any real doubt as to whether an retirement is account is protected in Chapter 7, the debtor is best advised to file for Chapter 13 and agree to pay back some of their debt over a 3 to 5 year payment plan. Chapter 13 trustees are not empowered to liquidate assets and payment plans are typically based on what a debtor can really afford to pay back. If in doubt, file 13.
Image courtesy of Flickr and 401kcalculator.org
United States District Court, District of Arizona
PLEA AGREEMENT BY RICHARD S. BERRY, WHY PAY A LAWYER
Case 2:14-cr-00322-SRB Document 47 Filed 01/27/15
BANKRUPTCY FRAUD
USA v Richard Sylvester Berry CR14-0322-PHX-SRB (SPL) 03/05/2014
Excerpt from Plea Agreement:
9. From April, 2010 through March, 2014, in the District of Arizona:
1. The defendant devised a scheme or plan to defraud
2. The defendant acted with the intent to defraud;
3. The defendant filed or caused to be filed a document in a proceeding under a Title 11 bankruptcy proceeding to carry out or attempt to carry out an essential part of the scheme.
4. The defendant’s act was material; that is, it had a natural tendency to influence, or was capable of influencing the acts of an identifiable person, entity, or group.
10. FACTUAL BASIS
a. The defendant admits that the following facts are true and that if this matter were to proceed to trial the United States could prove the following facts beyond a reasonable doubt:
I, Richard Sylvester B~, operated Why Pay A Lawyer? (WPAL), a document preparation service with offices in Tempe and Glendale, Arizona. From April 2010 through March 2014, I worked with an associate in Las Vegas, NY, to make money from distressed homeowners by defrauding the U.S. Bankruptcy Court, bankruptcy trustees, mortgage lenders, and other financial institutions. My associate in Las Vegas operated a company called Weimar Investments, which advertised a foreclosure rescue program. Once a homeowner paid an initial startup fee to Weimar Investments, worked with others to transfer a fractional Interest of the homeowner’s property into an unrelated bankruptcy case. To do this, I used bankruptcy: cases for some of my WP AL clients. Once Weimar Investments recorded a fractional interest transfer to one of my bankruptcy clients, I directed employees of WP AL to file a schedule of assets in the bankruptcy case listing the homeowner’s property in the unrelated bankruptcy case. The WP AL clients had no actual interest in the property, and often had no knowledge that I was listing the property in their bankruptcy case. The filing of the schedule of assets was material to the bankruptcy case and die foreclosure process, though because it fraudulently triggered the automatic stay provisions of the 11:S. bankruptcy code and temporarily stopped the foreclosure. I did it so that we could collect fees from the homeowners by delaying lawful foreclosures. Weimar Investments collected between $200,000 and $400,000 in fees, and I received more than $30,000 but less than $70,000.
When mortgage lenders and other financial institutions attempted to lift the automatic stay and proceed with the foreclosure, we 
transferred the fractional interest to a different WPAL client’s bankruptcy case, and I directed WP AL employees to file a schedule of assets in the new bankruptcy case listing the homeowner’s property. I did this to fraudulently trigger another automatic stay. I continued to do this until the homeowner stopped paying fees to Weimar Investments.
On June 29, 2010, in furtherance of the scheme, I directed WPAL employees to file a schedule of assets in a bankruptcy case for A.M., one of my WPAL clients. The schedule of assets listed a property on Emerald Springs Lane in Las Vegas, Nevada. A.M. knew nothing about the Emerald Springs property, and had no actual ownership in the property.
Signed, Richard Sylvester Berry
The post Richard S. Berry, Why Pay a Lawyer, Pleads Guilty to Bankruptcy Fraud appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Trustee’s Meeting With Debtor Once your bankruptcy case is filed, the clerk of the United States Bankruptcy Court will send a notice of your upcoming 341 meeting of creditors. The notice will be sent to all creditors, the debtor and the debtor’s attorney. This meeting of creditors is an opportunity for the panel trustee to+ Read More
The post In Anticipation Of Your Meeting Before The Bankruptcy Trustee appeared first on David M. Siegel.
Powerful Collection Tool A very powerful collection tool is for a creditor to freeze a debtor’s bank account. Most large creditor law firms and other collection lawyers have the ability to find out where you work and where you bank. Once a creditor has obtained a judgment and has knowledge as to where you bank,+ Read More
The post How To Legally Unfreeze A Frozen Bank Account appeared first on David M. Siegel.
Credit Score Concerns Everybody is concerned with their credit score these days. Everybody wants to rebound as quickly as possible after a bankruptcy case. A better credit score will indicate that you are a better risk for future credit opportunities. The interest rate that you can garner will be better if your score is better+ Read More
The post Credit Bureaus Should Reflect Payments For Non-Reaffirmed Mortgage Debt appeared first on David M. Siegel.
Nokesville Bankruptcy Lawyer Information The Law Office of Robert Weed has handled more than six thousand bankruptcies in Prince William County. About two hundred with people in Nokesville. We’ve done the most bankruptcies of any law firm in Prince William County. Two of my four locations are convenient to Nokesville. My Woodbridge location, is just […]The post Nokesville Bankruptcy Lawyer Information by Robert Weed appeared first on Robert Weed.
Here at Shenwick & Associates, as part of our bankruptcy, creditors' rights and asset protection planning practice, we get many questions about spendthrift trusts.
A spendthrift trust is a trust that is settled for the benefit of a person (usually a person who is believed to be unable to control his or her spending) that gives a trustee authority to make decisions as to how the trust funds may be spent for the benefit of the beneficiary. In this post, we are specifically not discussing trusts that are self–settled (where the grantor/settlor is also the beneficiary). Creditors of the beneficiary generally (but with exceptions, discussed below) cannot reach the funds in the trust, and the funds are not actually under the control of the beneficiary.
To qualify as a spendthrift trust, the trust agreement should generally include a spendthrift provision–a provision that creates an irrevocable trust preventing creditors from attaching the interest of the beneficiary in the trust before that interest (cash or property) is actually distributed to him or her. Also, the trust agreement should not provide for mandatory distributions to beneficiaries (which allows the accumulation of income), but should provide for distributions at the discretion of the trustee. However, once a distribution is made from the trust to the beneficiary, creditors can attach that distribution.
In New York, there are two ways a creditor can attach the income a beneficiary receives from a trust. One way is via § 7-3.4 of the Estates, Powers and Trust Law, which provides that if a trust doesn't provide for accumulation of income (i.e. all income from the trust must be distributed at least annually), then a judgment creditor can reach all of the income due the beneficiary in excess of the amounts required for his or her education and support.
The other way is through § 5205(d) of the Civil Practice Law and Rules (CPLR). This section of the CPLR governs personal property exempt from the satisfaction of money judgments. Subsection (d) provides that a creditor can reach 10 percent of the income interest of a trust. However, if a court determines that the reasonable needs of the beneficiary and his or her dependents can be met by less than 90 percent of the trust income, then a greater percentage of the income can be reached by the creditors.
In a Florida bankruptcy case that applied the provisions of the CPLR to a New York spendthrift trust, the bankruptcy court took into account the beneficiary's total income and support from all sources, held that half of the trust income was unnecessary to meet the reasonable needs of the debtor and her dependents and concluded that such income could therefore be reached by the beneficiary's creditors.
In bankruptcy, spendthrift trusts are exempted under § 541(c)(2) of the Bankruptcy Code, which provides that "[a] restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable non-bankruptcy law is enforceable in a case under this title." So if a spendthrift trust is validly created pursuant to applicable state or federal (i.e. qualified retirement plans) law, then the spendthrift trust will not be property of a debtor's bankruptcy estate and not be subject to reach by creditors or the bankruptcy trustee.
To learn more about spendthrift trusts or protecting your assets from creditors both inside and outside of bankruptcy, please contact Jim Shenwick.
Foreclosure I think it’s safe to say that the peak of the foreclosure crisis is behind us. Many people have already lost their homes, sold their homes, walked away from their homes or reorganized their debt through chapter 13 bankruptcy. Others have received modification offers from lenders, offers for deeds in lieu of foreclosure, relocation+ Read More
The post Extending The Time In Your Home Through Bankruptcy appeared first on David M. Siegel.
Flickr: Jacob BotterWHO CAN KEEP PROPERTY IN A CHAPTER 7 BANKRUPTCY?
Flickr: RyanWhen filing a chapter 7 bankruptcy, understanding how exemptions work is important. Debtors are allowed to keep exempt assets. Debtors lose non-exempt assets in a chapter 7 bankruptcy, so it is important to know whether an asset is exempt from bankruptcy or it is not.
Bankruptcy Exemptions
The bankruptcy code allows an individual debtor to exempt real, personal, or intangible property from being sold in bankruptcy. Real property is another name for real estate. Examples of personal property can be money, cars, clothing, jewelry or household furniture. Intangible property can include the goodwill of a business. What is important to understand is that a lot of different types of property can be classified as exempt when filing bankruptcy. 
Flickr: Canon
List and Describe ALL Assets
Under bankruptcy law, debtors are required to list ALL of their assets in their bankruptcy paperwork. Debtors are required to declare whether an asset is exempt, and the amount an asset is exempt.
Home Exemption Example: 
Flickr: David PrasadFor example, let’s say a homeowner lives in a home worth $100,000. She has a mortgage with $50,000 left to be paid. If the homeowner were to sell the home (with no costs), she would pocket $50,000 after paying off the Mortgage. Therefore, the homeowner has $50,000 in home equity.
If the homeowner would have to file a chapter 7 bankruptcy, she would need to describe in the paperwork the home address, the fair market value, and the amount owed on the mortgage.
Next, the debtor will then need to declare whether the home equity is exempt. The amount afforded in home exemptions is NOT set. It is different from state-to-state. It can change depending on the debtors’ age and marital status. It can also differ by which set of exemption laws a debtor chooses. For example, in California, debtors can choose from two separate sets of California exemption laws. 
Flickr: CaliDebtors need to determine how much they can claim BEFORE filing bankruptcy. This should be done with a qualified bankruptcy attorney. A mistake in the amount of exemption permitted by the law could cause the home to be sold.
Other Exemptions:
California also prescribes exemptions for other assets. Generally speaking, qualified retirement accounts are fully exempt. Debtors can claim exemptions for equity in cars, household items, and tools of the trade, to name a few of the popular exemptions.
Wild Card Exemption: In California, debtors can SOMETIMES add exemption credits to cover extra equity in particular asset categories if a debtor runs out. Here is a general description of how it works:
Flickr: Peter
Let's say a debtor is an auto mechanic. He owns $10,000 in "tools of the trade". Let’s assume that the exemption law where he lives – after working with qualified bankruptcy attorney, right? -- determine he is allowed to exempt up to $7000 of his tools. That means $7,000 of the tools are protected and $3,000 worth of the tools are not protected (non-exempt). The bankruptcy trustee would have every right and a duty to seize and sell the $3000 worth of tools for the benefit of the creditors. By using the "wild card" exemption, the debtor can apply extra exemption money and declare the $3,000 as exempt.
Flickr: Tim PierceThis California exemption is the “Wild Card” exemption. It gets its name from the poker card game. Have you ever played poker, calling out “deuces wild” or “Jokers wild”? "Jokers wild" in a card game means that you can turn a Joker into another card to help your hand of cards out.
As you can see, deciding which assets are exempt and how and how a debtor can claim an asset as exempt from the bankruptcy estate can be one of the more important and difficult aspects of his bankruptcy case. A mistake can cause an asset to be sold to pay creditors. It is extremely important to consult an attorney if the debtor has any questions regarding the issue of exempt assets.
The economic depression appeared to be very challenging to the average individual’s budget. Individuals are even now feeling the consequences and finding it tough in order to get back on good financial ground right after the recession has actually been reported passed.
One can learn How To Make Money In A Recession in ways which don’t entail bets that stock market trading will certainly climb. Actually, one of the ways you possibly can make profit in a reduced industry is by making a bet a organization is going to generate losses. Even though this is a high-risk method to make investments, it might be extremely financially rewarding if you are correct.
The process is known as shorting and it works by asking for several shares, exchanging them then buying them once again as soon as they’re expected to end up being returned towards the person. You’ll earn money as soon as the price for every share around the due date might be under the amount at which you sold off the shares of stock. Naturally, like any additional investment, this technique entails danger.
Even so, with a economic downturn, shorting might be a lot less risky than acquiring stocks and shares for long term increases. Take a look at me recession to understand other methods to be able to make money from this volatile economic climate to ensure you will not lose your accumulated money.
Updated daily, this blog will keep you informed on the latest bankruptcy news! 
Learn more about how Bankruptcy works and what you need to know.