Q: How long does cashing out a retirement account ($20k) impact income guidelines for Ch 7 filing?
Is it considered income for one month and Iwould have to wait six months for that to not be considered?
A: You would need to wait six months.
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A:
When you cash out a retirement account, the funds received are typically considered income for means test purposes in a Chapter 7 bankruptcy filing. The means test averages your income over the six months prior to filing, so a large withdrawal could affect your eligibility if it significantly increases your average income.
If this withdrawal skews your income above the median for your state, you may need to wait for six months to pass so that this income is not included in the means test calculation. It's important to review all financial transactions and their timing carefully with a legal advisor before making decisions, as they can have a substantial impact on your bankruptcy eligibility and strategy.
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