Monday, November 25, 2013

Retirement Funds:A Look At The Solo 401(K) For The Self Employed -- OK, don't stop reading now, and don't start getting teary-eyed.

Of course, taxes are relevant to bankruptcy.  But, I am actually going to take a different approach than what you might be thinking concerning bankruptcy.

There are but few places where one can maintain assets in a secured place, free from the threat of creditor's claims.  One place is created by everybody's best friend, the IRS (yes, love your enemies!).  If you have a retirement account, recognized by the Internal Revenue Service, in most instances, those funds are probably protected.

OK, so now for retirement accounts.  While everyone has heard of many of the more popular retirement plans, such as an IRA, and a 401(k).  But there are actually many types and varieties of retirement plans, including one I only recently heard of referred to as a Solo 401(k).

That's right, this blog is really about something you might be interested in reading if you are self-employed and looking for a way to put aside some money.

If you are looking for a way to put aside some money for retirement, a Solo 401(k) may be just the thing for you. As you probably already know, there are limited places you can put funds to where they are protected from creditor's claims.  While it appears most self-employed individuals have an IRA as a retirement vehicle, a Solo 401(k) allows you to put away a significant chunk of change that’s protected from taxes and creditors.  It’s all in the name of retirement and long-term financial well-being., self-employed professionals and others are used to the “feast or famine” routine.  Good years can be spectacular, but they’re largely balanced out by the not-so-good ones.

Solo 401 (k) – A Better Bet For Self-Employed

The Solo 401(k) allows much larger annual contributions than the typical IRA account.  If you (or you and your spouse) are the only employees, you get to skip all of the fairness rules that make running a 401(k) plan so expensive. For 2013, you can put away more than three times the IRA limit if you are over 50.  You can also defer some of your earnings for later years, too.  Total contributions in a year can be as much as $50,000.  That will fund lots of leisure in retirement, if you contribute regularly.

Solo 401(k) Must Be Opened By December 31. In order to take advantage of the Solo 401(k) for this year, you must open and fund your plan by December 31.  This is in contrast to the normal deadline of April 15 for opening and funding an IRA.

Contact any of the discount brokerage houses to open up your Solo 401(k) Plan.  Your future self will thank you.

Wednesday, November 20, 2013

Some Bankruptcy Fees Going Up December 1, 2013

Euro Chart 1 
What ever happened to the concept of what goes up, must come down.  I think this concept is a bit blurred when it come to government, and as of late, the Courts.

The Bankruptcy Court is at it again, that is, they are increasing fees on certain things.  

Information from the U.S. Bankruptcy Court, Middle Florida on fee increases based on recent actions taken at the Judicial Conference and Changes effective December 1, 2013 are as follows:

     - a new fee of $176.00 has been established for the filing of motions for the sale of property free and clear of liens under 11 U.S.C. § 363(f).
     - the records retrieval fee in all federal courts has been increased by $11.00 (from $53.00 to $64.00) for the first box requested from a Federal Records Center, and created a new fee of $39.00 for each additional box requested.

and for those that handle bankruptcy appeals, under the Conference increased the appellate filing fee (referred to as the "docketing fee" in the schedule) from $450.00 to $500.00.

As for the good news, most of the fees bankruptcy practitioners deal with everyday have not been touched.  At least, not yet.

Wednesday, November 6, 2013

How Is Social Security Income Treated in a Chapter 13 Bankruptcy? 

So, you need to file a Chapter 13 bankruptcy.  Your earned income covers your secured payments, such as your mortgage and vehicle payments.   But you also have unearned income in the form of monthly Social Security checks.  So, do you have to include the social security checks as income in the Chapter 13 Plan?

The short answer is NO. 

Social Security income may be used, it does not have to be used in means test or the Chapter 13 Plan.  This means, this is income you can keep. Although it must be disclosed, it is not included in disposable income that must be paid to the Trustee.

If you are interested in a longer analysis of this, you would first look to the good faith test under Code § 1325(a)(3).  This does not require the contribution of Social Security benefits to a Chapter 13 plan. 42 U.S.C. § 407 was passed by Congress to protect Social Security benefits, which have a special status in
this country.
Next, you should look to Section 407, which was meant to be so wide and sweeping that § 407(b) provides that “[n]o other provision of law ... may be construed to limit, supersede, or otherwise modify the provisions of this section except to the extent that it does so by express reference to this section.”

And lastly, we should review the good faith test under § 1325(a)(3); it does not mention section 407, so §1325(a)(3) must not be meant to limit, supersede, or otherwise modify section 407.

Consequently, debtors are not in bad faith merely for doing what the Social Security Act and the Bankruptcy Code allow them to do.

In re: Canniff, --- B.R. ----, 2013 WL 5310178 (Bankr. S.D. Ind. Sept. 19, 2013)