Increasing my contribution in 403(b)

[Zigner]

5 is better than 0, but now my concern is on 403(b)

I don't believe that it's proper to help you avoid paying an amount that you have been found to owe by the court. Pay (towards) your debt.

 

[jamal67]

I don't believe it is improper to for me to get information.

Thanks for your time. Good bye

 

[LdiJ]

"Why can't you spend it all? " the issue is not on this matter. There is no rule or proof that states that I must or I will spend it!!

"The money will not be in your bank account because you used it to make a contribution to your 403(b). That is no different than spending the money in your account on things you need or want before it hits the six month mark. " can I give all that money to someone else and claim that I would have spent it if it is in my account therefore I did not do any fraudulent transfer by giving it to someone else? Obviously the answer is NO. My question is: whetehr 403(b) will provide any protection to me from fraudulent transfer claims.

Again, it is perfectly legitimate to increase your contribution to your 403(b). That would not be a fraudulent transfer.

 

[LdiJ]

I don't believe that it's proper to help you avoid paying an amount that you have been found to owe by the court. Pay (towards) your debt.

Zig, I understand that you feel strongly about this sort of thing, but that is not a legal answer, its a moralistic, somewhat judgmental answer based on your own values. The legal answer is that the OP is perfectly free to increase his retirement contributions.

 

[Zigner]

Zig, I understand that you feel strongly about this sort of thing, but that is not a legal answer, its a moralistic, somewhat judgmental answer based on your own values. The legal answer is that the OP is perfectly free to increase his retirement contributions.

It is a legal answer. The court has determined that the amount is owed, so there is nothing wrong with expecting the OP to pay (towards) that amount, as opposed to hiding the money.

 

[LdiJ]

It is a legal answer. The court has determined that the amount is owed, so there is nothing wrong with expecting the OP to pay (towards) that amount, as opposed to hiding the money.

Legally, making a contribution to your retirement account is NOT hiding the money. Just like paying your utility bills, your insurance bills, buying groceries and sundries and your house payment or rent, are not hiding the money.

 

[Zigner]

Legally, making a contribution to your retirement account is NOT hiding the money. Just like paying your utility bills, your insurance bills, buying groceries and sundries and your house payment or rent, are not hiding the money.

I disagree with you, and that is ok.

 

[Taxing Matters]

Thank you. However, I am already head of household therefore I am not worried about wage garnishment as I can prove this if my wage is garnished. I wish to increase my contribution in my 403(b) which would be the only source of my income after I retire. I am concerned if this increase will be considered as fraudulent transfer.

If your wages are exempt from attachment as head of household then using that exempt asset to fund another exempt asset is generally not a fraudulent conveyance under Florida law as there is no intent in that case to hinder or delay a creditor. For example, a Florida federal bankruptcy court held:

A transfer of exempt property (or in this case, the transfer of loan proceeds from exempt property) to other exempt property is not a fraudulent transfer:​

​

A debtor can only commit fraud on his creditors by disposing of such property as the creditor would have a legal right to look for satisfaction of his claim.... ‘A sale, gift or other disposition of property which is by law absolutely exempt from the payment of the owner's debts cannot be impeached by creditors as in fraud on their rights. Creditors have no right to complain of dealings with property which the law does not allow them to apply on their claims, even though such dealings are with a purpose to hinder, delay or defraud them.’​

​

In re Kimmel, 131 B.R. 223, 229 (Bankr.S.D.Fla.1991) (quoting Dean v. Heimbach, 409 So.2d 157, 159 (Fla. 1st Dist. Ct.App.1982)). As a result, by mortgaging the Lenox Avenue property, an exempt property, and using it as collateral to purchase other properties as tenants by the entireties, the transfers are beyond the scope of the statute. Based upon this alone the Trustee's objection is overruled.​

In re Mathews, 360 B.R. 732, 746 (Bankr. M.D. Fla. 2007).

Thus, using exempt wages to fund the exempt retirement account should not be a problem. It may be a different story, however, if the wages were not exempt from attachment. You may wish to verify that with a Florida attorney familiar with debt collection in that state.

 

[Taxing Matters]

Legally, making a contribution to your retirement account is NOT hiding the money. Just like paying your utility bills, your insurance bills, buying groceries and sundries and your house payment or rent, are not hiding the money.

Using nonexempt assets and transferring them to exempt assets (other than a homestead protected by the Florida Constitution) may well be a transfer that can be set aside under Florida's fraudulent transfer statute, assuming the other requirements of the fraudulent transfer law are met. The case law suggests as much.

 

[Taxing Matters]

I don't believe that it's proper to help you avoid paying an amount that you have been found to owe by the court. Pay (towards) your debt.

That is a moral judgment, though, not a legal one.

 

[LdiJ]

Using nonexempt assets and transferring them to exempt assets (other than a homestead protected by the Florida Constitution) may well be a transfer that can be set aside under Florida's fraudulent transfer statute, assuming the other requirements of the fraudulent transfer law are met. The case law suggests as much.

I took his word for it that he was not subject to garnishment of his wages. If he was subject to garnishment then it really wouldn't matter how much he put in his 403(b), because they would include that amount of money in the garnishment percentage anyway.

 

[Zigner]

That is a moral judgment, though, not a legal one.

I don't think it's so clear-cut. Legally, he should be paying his debt.

 

[Taxing Matters]

I don't think it's so clear-cut. Legally, he should be paying his debt.

Legally, it is pretty clear cut. A judgment is NOT an order to pay (unlike a child support order, which is an order to pay). As a result, a judgment does not confer any legal obligation on the defendant to whip out his check book and write a check to pay the judgment. Of course, a judgment does give the judgment creditor the right to attach nonexempt income and and assets of the judgment debtor. Thus, if the judgment debtor does not want that to happen and he/she has the money to pay it then it is often prudent to whip out that checkbook.

Morally, I agree debtors should pay their debts. But legally the judgment does not require the debtor to pay. It just provides a tool for the creditor to use to collect.

 

[Taxing Matters]

I took his word for it that he was not subject to garnishment of his wages. If he was subject to garnishment then it really wouldn't matter how much he put in his 403(b), because they would include that amount of money in the garnishment percentage anyway.

It would matter to the extent that nonexempt wages were put into the 403(b) prior to the creditor serving the wage garnishment order.

 

[LdiJ]

It would matter to the extent that nonexempt wages were put into the 403(b) prior to the creditor serving the wage garnishment order.

I can see that.