How can I protect my IRA after the defendants filed Chapter 7 bankruptcy? 11 Answers as of November 21, 2011

You can collect on your judgment from wage garnishments on any other income, but if their only income is social security and pension they may be judgment-proof.

You should see an attorney on this. Putting funds in a IRA is usually OK when you are filing BK but there are IRS rules on how much a person or couple can put in an IRA per year. I would research this and if the sums that they allegedly placed in an IRA are more than is allowed they may not be telling the truth about the status of the funds. The problem for you is that if the court finds that the funds are not in an IRA then the court will take the funds and distribute them equally among all their creditors.

Transfers prior to filing bankruptcy to avoid collection by creditors will be considered fraudulent and can be undone by the bankruptcy court. You will need to file an adversary complaint in the bankruptcy court to request the funds be removed from the IRA.

Yes. You can avoid (undue) the contributions if they: (1) are larger than the contributions that would make them tax exempt under the IRS Code; or (2) were made with an intent to delay or avoid payment to creditors. The second theory is called a "fraudulent transfer" and is often used to reverse bankruptcy planning transfers such as you have described.

Yes. You can inform the Chapter 7 Trustee of their case who may make an objection to this action. You can also sue the Debtor to determine you award as non-dischargeable in Bankruptcy.

The bankruptcy court can undo this transaction with the proper application. You cannot do it yourself. This is complex bankruptcy litigation.

I'm not sure how you know the facts that you allege, but if true, they are serious. You need only explain to the Trustee in bankruptcy what occurred. A simple letter is the best way to do this. Be sure to be completely factual. The trustee does not care about your case. They only care about the transfer details, dates, amounts, names of banks, etc. The trustee has extraordinary powers to undo this type of transfer very easily. The trustee will take 25 - 33% for their trouble. The rest will be divided between the unsecured creditors based on the size of their claims. So be sure to file a claim in the Bankruptcy Court. The debtor may even have their discharge denied. If that happens, you can pursue them again in your county courts. Do not even think about filing an action to determine dischargeability unless you have an attorney to file it. Those are very dangerous and you don't need to do it.

Under Section 727 of the Bankruptcy case, you can challenge their bankruptcy for stashing assets out of the reach of creditors. You also have the right under Section of the Bankruptcy Code to file a Motion to Dismiss the bankruptcy as being filed in bad faith. The burden is on you to do something and you have a limited time in which to do it. So, if you are going to fight, you had better get moving. The things that you would have to file must be filed no later than 60 days following the creditor's meeting.

It sounds like they may have made a fraudulent transfer. You will have to consider: the chance of getting your judgment, if the amount is worth it, and the expenditure involved in pursuing it. Go and see a knowledgeable local bankruptcy creditor's attorney for an idea of the cost and the process involved. Most times it is not worth it but if your judgment is large enough this might be a good case to pursue since the funds still exist.

Yes, hire an attorney to object to their discharge of your debt if any of it was disclosed wrong on the bankruptcy petition or if they fraudulently transferred money to avoid creditors.