Retirement Funds:A Look At The Solo 401(K) For The Self Employed

TAXES -- 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.


Freelancers, 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.

Read more: Solo 401(k) Do’s and Don’ts

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.

Some Bankruptcy Fees Going Up December 1, 2013

 
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.

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)

Government Shutdown: Courts and Clerk Open

From the website of the United States Bankruptcy Court: Middle District of Florida Until further notice, please note that the Bankruptcy Court and Clerk's Office will continue to operate under its normal schedule, including matters set for hearing and public hours, in the event of a government shutdown on October 1, 2013. Section §341 meetings of creditors will also continue, as noticed. Please note, a Google search of the web reveiled many blogs stating the bankruptcy courts would be shut down if the government shut down, as the courthouse workers would be out of work.  Don't believe everything you read on the internet. I you find any new information regarding the government shutdown as it effects the federal courts, please post it here.

Should I get Divorced Before Filing Bankruptcy?

Many people are contemplating divorce and bankruptcy at the same time. In fact, in some cases, ones financial position may have created stresses in their life that have contributed to the decision to file for a dissolution of marriage. But rarely have I seen financial problems, in and of themselves, cause on to get divorced. In fact, I have found just the opposite; one in financial difficulties often becomes more dependent on the other spouse to make it through hard times. 

While the question of whether to file bankruptcy before of after getting divorced may seem like a simply one on the surface, it is actually more complicated than simply giving a simple yes or no type answer. While the answer to this question is not as complicated as the bankruptcy code itself, the answer is directly tied to the bankruptcy code. Numerous things have to be considered, including the following:

• Is there a custody issue?
• Are both spouses working?
• Is the household income more than the median household income for debtors of your household size in your state?
• Is a tax refund expected at the end of the year?
• Do you own your house (as opposed to renting)?
• Are wages being, or going to be, garnished?
• Is the divorce contested?
• Are both spouses contemplating bankruptcy?
• Which chapter of bankruptcy is most appropriate depending on when it is filed?
• Are you behind on payments on any secured debts you might want to keep?
• In the distribution of assets from the divorce, are there any funds to be transferred from one account to another pursuant to the judge's order?

While this is far from an exhaustive list, this should show you, at least on the surface, some of the things an attorney should be thinking about when such a question is posed. In fact, the question is actually complicated enough, depending you your situation, a bankruptcy attorney may need to get some information about your divorce from you divorce attorney before answering this question.

To get a proper answer to this question, I suggest you call to schedule an appointment for a consultation with a competent bankruptcy attorney in your area?

Discount Jaguar Tickets

Below is a public service announcement not bankruptcy related.  If you like it, please let me know.

"Where Can I Find Discount Jaguar Tickets?"

Are you ready for some Jaguars football?

As a bankruptcy attorney, and consumer advocate, I am always interested in helping others financially.  That means, in part, saving money. What does this have to do with bankruptcy or foreclosure defense?  NOTHING.  This is just good news.

I am a member of the Rotary Club of South Jacksonville, and as a fund raiser for Rotary District 6970, I am able to offer my clients and other friends discounted Jaguar tickets.

CLICK HERE TO PURCHASE TICKETS THROUGH THE ROTARY PROGRAM

<https://oss.ticketmaster.com/aps/jaguars/EN/link/promotion/home/98d379e7ea328ff96a6e28e64c489fa6cb97d183>

Although these tickets were made available to Rotarians, I am able to offer them to my clients and friends.  This is a fund raising effort continued from last year, with minor changes.  Now the tickets can be purchased online.

- A portion of every ticket purchased makes a donation to the Rotary Club.

- If offered a choice of Rotary Clubs when making your purchase, please select the Rotary Club of South Jacksonville.  This allows some of the proceeds to be returned to this particular Rotary Club (of which I am a member) for use in local community projects.

- Exclusive discounted ticket prices saving $15 off game day prices.

- No minimum number of tickets required for purchase.

- Available for all remaining 8 Home games.

- FREE Shipping or direct E-mailing on all orders.

 PREDICTION CENTER

- If you have a Jaguar season (or game) PREDICTION, please let me know by commenting below.

I was hesitant about putting this on my Blog because it is not Bankruptcy or Foreclosure Defense related.  If I should post more pages like this one, let me know and/or press the "Google +" button at the top of the page.

Thanks :)

Can I Keep My Tax Refund If I File Bankruptcy?

In the Middle District of Florida, the courts have generally held tax refunds should be apportioned according to a filing spouses contribution to the taxable income according to IRS guidelines.  Obviously, this is only applicable when only one spouse files.  

Well, I have some good news.  Recently the Eleventh Circuit issued a ruling regarding this.  If you are married, filing without your spouse, make sure your attorney knows of the following case.  You may be able to keep your tax refund.

---

Stevenson v. Uttermohlen (In re Uttermohlen), Case No. 13-10289 (11th Cir. Aug. 9, 2013) (unpublished) (per curiam).

Ruling: 

The United States Court of Appeals for the Eleventh Circuit affirmed the judgment of the United States District Court for the Middle District of Florida, and ruled that the debtor's right to a tax refund is exempt as tenancy-by-the-entireties property under 11 U.S.C. § 522(b)(3)(B) and Florida law, even where the refunded tax contributions relate solely to the debtor's income, and the non-filing spouse does not work.

Procedural context: 

The United States Bankruptcy Court for the Middle District of Florida (Catherine Peek McEwen, Bankruptcy Judge) sustained an exemption of tax refunds over the Chapter 7 trustee's objection. On appeal, the United States District Court for the Middle District of Florida (Virginia M. Hernandez Covington, District Judge) affirmed the Bankruptcy Court's ruling. The Chapter 7 trustee then appealed to the United States Court of Appeals for the Eleventh Circuit.

Facts: 

Debtor sought to exempt a $10,668.00 tax refund as tenancy-by-the-entireties property. The Chapter 7 trustee objected, arguing that (i) the refunded tax contributions related solely to debtor's income, business income, and losses, (ii) the non-filing spouse did not work outside the home, and (iii) the tax refund does not qualify as tenancy-by-the-entireties property, but should be apportioned on the basis of each spouse's income. The Bankruptcy Court found that all unities required to to own property as tenants-by-the-entireties existed on the date the debtor filed bankruptcy, and overruled the Chapter 7 trustee's objection.

Judge(s): 

 Barkett, Marcus, Hill