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questions, concerns, you name

New Contributor

questions, concerns, you name

Hello friendly forum folks


First of all, thank you for everyone's help and suggestions in the past.  


My situation...


I filed for a Chapter 13 on November 1, 2017.  Made it through the creditors meeting, got the case confirmed in January.  I have made 3 payments.  Things seemed to be going well.  Then I lose my job.  I am currently looking but my next payment is coming up on March 1.  

My only "income" right coming this week is a fairly big tax return that I will use to pay bills and do some repairs, etc.  I have talked to my attorney about my refund and in my district, anything over $2000 is subject to be kept by the trustee.  My attorney is going to file a motion for me needing all of the refund for the things I need it for.  


After the refund, at this time, until I can find a job, I won't have income.  It's the first time ever (thank God) I have ever been in this situation.  I do have a retirement account that I can cash out.  Trust me, I don't want to but sometimes you simply have to do what you have to do...right now this what I may have to do.  


I filed the Chapter 13 as I was behind on my mortgage and car.  (other issues had crept up).  I asked my attorney today, through an email, about converting to a Chapter 7 as I literally do not have an income as of now.  


If I cashed out the retirement (and it would take about a month for me to receive it), I could literally get caught up on the mortgage and even pay off the car if I wanted to.  My question really is:


How does a trustee look at a retirement cash out before and after a conversion from Chapter 13 to a Chapter 7?  I know there are exemptions and being in Texas, there are really good exemptions, including home, auto and retirement funds. 


I know this is long and if you still reading, thank you.  Any ideas or advice?  I am going to be talking in full to my attorney this week about this as I have about a week before my next payment is due.  


Thank you again!


Message 1 of 4
Moderator Emerita

Re: questions, concerns, you name sorry this is all happening to you at once! 

If you can convert, I would do it. With the job loss, it’s more added stress you don’t need right now. 


As for the retirement payout, I honestly don’t know. But I would definitely speak to your attorney about a hypothetical situation if that were to happen. 


Please se keep us updated! 



Got some pruning to do... No more new cards!
Message 2 of 4
New Contributor

Re: questions, concerns, you name

Thank you for the support!   I have been doing a little more reading and it appears if I can wait to cash it out after I convert the bankruptcy, it will stay with me (especially with the Texas exemptions).  Actually the exemptions are really generous.  


I guess what I really need to find out is how long I will have to work out a deal with my mortgage and auto companies to handle paying off the car and catching up with the mortgage.  I mean, if they would wait, I would absolutely take care of the car and the late mortgage payments and be able to pay the regular payments with help of the cash out.  

I will be talking to my attorney sometime this week to get some advice.  I will post again when I hear something.  


Thanks again!

Message 3 of 4
Frequent Contributor

Re: questions, concerns, you name

Right now your retirement account is exempt property -- meaning the Chapter 7 trustee cannot go after it. I am assuming, of course, that we're not talking about an IRA that exceeds $1.2 million. 


With that in mind, I would strongly advise not taking an IRA distribution until you are out of bankruptcy, or at least until you convert to CH7 and your trustee has abandoned the estate (assuming you are a no asset case). There's little sense in converting your exempt retirement funds, to non-exempt funds that a trustee may be able to go after. 


With all that in mind, I would ask your attorney if there are options that would prevent your mortgage lender from foreclosing? For new fillings there's an automatic stay. I'm not sure about the impact on conversions. If you still need to do a distribution, I would get guidance from your attorney on when this should happen.




Message 4 of 4
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