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Columbus OH Real Estate News

by Jason Opland & The Opland Group

By Jason Opland | Agent in Powell, OH

Short Sales and Retirement Assets/Accounts

I bought a condo in Califfornia for $800K, 3 yrs ago. Current value $550K. My funds are exhausted. My assets are 401k and IRA plus equity in other investment property.  Is there any way to protect assets, in the event of short sale or deed in lieu?



Hello Vince,

A June 15, 2008 the Washington Post did an article titled: “Where Short Sales Stumble” which suggested the following:

“If an upside-down owner must sell, even at the reduced price, he’s expected to take money out of savings, cash in the 401(k), borrow from the in-laws or otherwise pay off the mortgage.”

THIS IS TERRIBLE ADVICE!!  First, the in-laws should keep their money.  Second, section 522(d)(12) of the bankruptcy code lists the following as exempt:

“Retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986.”

And 522(n) exempts up to $1M for an IRA:

“For assets in individual retirement accounts described in section 408 or 408A of the Internal Revenue Code of 1986, other than a simplified employee pension under section 408(k) of such Code or a simple retirement account under section 408(p) of such Code, the aggregate value of such assets exempted under this section, without regard to amounts attributable to rollover contributions under section 402(c), 402(e)(6), 403(a)(4), 403(a)(5), and 403(b)(8) of the Internal Revenue Code of 1986, and earnings thereon, shall not exceed $1,000,000 in a case filed by a debtor who is an individual, except that such amount may be increased if the interests of justice so require.”

Since 401k and IRA accounts are generally exempt from creditors in bankruptcy and do not become a part of the bankruptcy estate, they should not be used to pay an upside-down mortgage, as the WaPo article dangerously suggested.  While it’s true that these retirement assets are listed on your short sale financial statement submitted to the lender; nevertheless, they remain yours. 

Now having written that, a debtor can not make contributions to those retirement accounts for the intended purpose of defeating creditors with pre-bankruptcy maneuvering.  And that brings us to the next subject - fraudulent conveyance - equity in other investment property you write?  You’ll need to beware of fraudulent conveyance.  

So, call me crazy but I see some short sale deficiency negotiations in your future!

Thanks for the questions and hope this helps.

We should inform you we are not attornies and this information should not be considered legal advice.  Please consult an attorney for legal advice. 

If you are a homeowner who feels they might qualify for a loan modification or short sale please give us a call as we’d be happy to assist you in your efforts to understand your options and in determing which option is the best for you! All consultations are COMPLETELY CONFIDENTIAL and ABSOLUTELY FREE. 

The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in;  Bexley  Columbus  Delaware  Downtown  Dublin  Gahanna  Grandview Heights  Granville  Grove City  Groveport  Hilliard  Lewis Center  New Albany  Pickerington  Polaris  Powell   Upper Arlington  Westerville  Worthington

Columbus OH Short Sales, Columbus OH Realtor, Short Sale Specialists, Short Sale Process, Ohio Foreclosure Process and your Options, Avoid Foreclosure, Short Sale vs Foreclosure, What to do when you owe more on your home than it’s worth, Loan Modification, New Albany OH Realtor, Powell OH Realtor, Dublin OH Realtor, Luxury Home Specialist, Luxury Real Estate, Buying a Short Sale or Foreclosure, How will a short sale affect your credit, Understanding Short Sales, Bank of America / Countrywide Short Sales, JP Morgan Chase Short Sales, Wells Fargo Short Sales, IndyMAC Short Sales, Citi Mortgage Short Sales, PNC Short Sales, National City Short Sales, Home Affordable Alternative Program (HAFA), What's My Home Worth?



By Kevin,  Mon Sep 20 2010, 12:31
It's important to make sure to get more then one opinion before purchasing even distressed property.

Kevin Kim
Washington Short Sale Expert

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