About a week ago the amendments to the bankruptcy code were passed and I am in the process of figuring them out. A lot of BS. Of some interest to people here are changes in what is exempt from creditors.
The way exemptions work in bankruptcy depends on what state you live in. In some states, when you file bankruptcy you can choose between the state and the federal exemptions. In other states you have to take what the state offers.
If you have the option to take the federal exemptions in your state, there are a number of changes. They cleaned up a lot of the retirement fund issues. If you have any specific questions, feel free to ask since I have to learn it anyway. A couple of points. One is that if you rollover an exempt 401(k) into a traditional IRA, those funds will continue to be exempt, no matter how much money is involved. Also, for non-rollover situations, $1,000,000 in a traditional IRA is exempt.
I am still looking at other plans.
There also was a bunch of changes to discourage state shopping. For example, with some complications, you have to live in a state for 730 days (can't they say two frickin' years?) to claim that state's exemptions. For homesteads there are some complicated limits that go into effect if you switch states or you were a "bad boy" and committed fraud. Still trying to get my arms around these rules.
I have a 300 page summary of all the changes. Anyone want to read?
The way exemptions work in bankruptcy depends on what state you live in. In some states, when you file bankruptcy you can choose between the state and the federal exemptions. In other states you have to take what the state offers.
If you have the option to take the federal exemptions in your state, there are a number of changes. They cleaned up a lot of the retirement fund issues. If you have any specific questions, feel free to ask since I have to learn it anyway. A couple of points. One is that if you rollover an exempt 401(k) into a traditional IRA, those funds will continue to be exempt, no matter how much money is involved. Also, for non-rollover situations, $1,000,000 in a traditional IRA is exempt.
I am still looking at other plans.
There also was a bunch of changes to discourage state shopping. For example, with some complications, you have to live in a state for 730 days (can't they say two frickin' years?) to claim that state's exemptions. For homesteads there are some complicated limits that go into effect if you switch states or you were a "bad boy" and committed fraud. Still trying to get my arms around these rules.
I have a 300 page summary of all the changes. Anyone want to read?