HAWKE – If you live in Texas now and go Bankrupt, you may want to stay awhile.

12 days ago, the Fifth Circuit Court of Appeals in New Orleans handed down a Decision in a Bankruptcy Case entitled Hawke v. Englehart.  The Hawkes were bankrupt and had what they thought should have been an exempt retirement account.  So, they went ahead after they filed for Bankruptcy and liquidated the account, ostensibly to handle some cash needs they had after the Bankruptcy case.  Unfortunately for them the Trustee in the case, Attorney Englehart, caught them doing so and sued them for the money to use to pay creditors.

Following on a precedent set in the Frost case a couple of years back involving the sale of a Texas homestead without reinvestment in another homestead within 180 days, the Court held that State exemptions are controlled by State law and since Texas says that your qualified retirement accounts are exempt only until you cash them in (and then for 60 days if you roll over) the money that was exempt at the time of filing became property of the Bankruptcy Estate when the Hawkes cashed out without rolling over into another qualified retirement account.

The case itself is highly controversial and very complicated.  But, the simple message is this.  If you have a homestead when you file, or, if you have a retirement account when you file, KEEP IT until your Bankruptcy Lawyer tells you its OKAY to sell or liquidate and only do what your lawyer tells you to do with the proceeds.  Get the lawyers opinion in writing!

This article is written by an attorney at Wyatt & Mirabella, PC. Always consult an attorney before making any legal decisions. To make an appointment today for a free consultation, please click here to contact us.