401k loan

[howie]

I have taken a 401K loan out and DO NOT regret it one bit. It was the best and only option at the time. You do not pay taxes on a 401K loan unless you cannot pay it back. It then becomes a withdrawal. Also, most of the time you cannot take a hardship withdrawal without first taking a loan. They want you to go that route first. Also, a car payoff would not be a good enough reason to take a hardship withdrawal in most cases. I would suggest if there are no other options, take the loan.

[howie]

"LOL
Or, you could simply SAVE the money that you would use to pay back the 401K. It is that kind of twisted financial logic that has the middle class one step from poverty."
__________________
You are saving the money because you are paying yourself back the interest. You are saving it in your 401K plan.

[sophie]

WOEISME: That is EXACTLY what I'm saying. I have no other choice but to take the loan. I know all the reasons financially why it's a mistake, but when you are backed into the corner and you have exhausted all possible avenues...

And thanks Howie and to everyone else for your thoughts.

Now back to my question regarding the bank deposits. I know that Nascar said he worked for a bank and that the bank never sends anything to the IRS. But, from what I understand, any deposits over 10,000 a day is to be reported. With that said, and let's just pretend my bank does this, is this a red flag (or purple, green, blue, etc) to my trustee? Howie, anything on your end?

[woohoogirl]

WOEISME: That is EXACTLY what I'm saying. I have no other choice but to take the loan. I know all the reasons financially why it's a mistake, but when you are backed into the corner and you have exhausted all possible avenues...

And thanks Howie and to everyone else for your thoughts.

Now back to my question regarding the bank deposits. I know that Nascar said he worked for a bank and that the bank never sends anything to the IRS. But, from what I understand, any deposits over 10,000 a day is to be reported. With that said, and let's just pretend my bank does this, is this a red flag (or purple, green, blue, etc) to my trustee? Howie, anything on your end?

Anything over $10,000 IN CASH gets reported. Imagine how busy everybody would be if everything over 10 grand had to be reported.

[sophie]

So a check from my 401k is not cash right? You're talking cash cash. Bills. Moola. Got it. Thanks!!

[woohoogirl]

So a check from my 401k is not cash right? You're talking cash cash. Bills. Moola. Got it. Thanks!!

That would be correct.

[MOMof3]

Take out the 401k loan & save your car. There is no pre-payment penalty on these types of loans. Work your butt off to save & pay it off sooner than the 5 years. Maybe even sell the car and buy a cheaper one with cash and pay down the loan with the proceeds. You are caught between a rock and hardplace. YES, you are at some risk if you leave your position for whatever reason, but maybe by that time, you will owe less and be able to cover it, or get a loan, or borrow from family, or ???

[MajorMike]

Sorry Mike, but your wrong! Borrowing from you 401(k) in never a good idea. If for any reason you cannot pay that money back, you'll have a problem. Not to mention that you'll be paying double taxes on that money! 1st when you withdrawal it for the loan, then again when withdrawal it when you retire. Remember, all that money is pre-tax...

EVERYONE, PLEASE REMEMBER! YOUR 401(K) SHOULD BE OFF LIMITS!!!!!

No, You're incorrect. Most of our 401K is AFTER tax money!!!
I've taken several loans. I'm never affected by them. It's only if you can't pay it back within the loan period that you have a problem.

[krielly]

I'm a bit confused about why you are worrying about your trustee getting some type of "flag" regarding a large deposit......
Aren't you planning on obtaining permission from your trustee to borrow these funds?

Your attorney is correct in that it shouldn't be a problem, as your payment will be close to what it currently is for your lease.

However, it COULD be a problem if you try to do it without going through the approval process.

Don't risk dismissal of your case when more than likely you will get approval. Remember, the trustee knows you need a vehicle to get to work. Your current lease was obviously approved, so there is no reason to think borrowing funds at the same payment as your lease would be denied.

K

[HHM]

Although I am willing to give you the benefit of the doubt, I am skeptical that you CANNOT get financed by someone.

How long have you been in your chapter 13?

If your attorney thinks it will be ok, then I really don't see a problem. I do think you need to get approval from the trustee, because the 401K loan would be NEW debt (in a technical sense).

I think some peoples admonishment about using 401K loans is that most people who resort to 401K loans do so as a last resort, and their financial situation has already gone over the tipping-point.

I suppose if you have NO other options, you can take the 401K loan.

[aa06a47]

In an emergency situation, a 401k loan is a quick way to solve a financial situation. If you in a chapter 13, you have to really look at the situation and make sure you can pay it back.

My 401k administrator makes it so easy to borrow money, it could be addictive like candy or something. I could go in tomorrow (Wednesday) to take a loan out and have the money in my bank by Friday.

I understand the double tax thing people are talking about, however, if you borrow money from a bank, you are paying the bank back with after tax money....6 one way, half a dozen the other.

After 3 years, I will see if I can buy out of the bankruptcy. Depending on the situation, I may borrow from my 401k to buy out of the bankruptcy.

[NASCAR20FAN]

So what happens if you cannot pay the loan back? If you get hurt or fired? What happens if you default on that loan? Assuming that you don't have enough left in your account to cover the balance? It is very short sighted to think that way! Reduce you contribution to 0 and use that money to help with your expenses or whatever! While it looks good on paper you couldend up paying big time in the end! Just my advise.

[MajorMike]

I know people who have defaulted on the loan. They can't get blood from a stone and were kept on a payment plan. You're paying yourself back. It depends on how much the loan is and the term as well. We can only take 50 percent of our 401k as a loan, but loans have worked out for us in the past and we paid them off.

[gophermn]

MSN had a big article about people using their 401K to save their home, lower credit cards, etc.. I did it. I just took out some/not all my 401K to save my house from going into foreclosure. I will be back on schedule and breath a lot easier knowing I paid the balance before it went to an attorney.

Thing is this kind of stuff is happening. Its not science. People are strapped and if you have no good credit, debt to income ration is terrible, what else can you do?

[BlessedOne]

So what happens if you cannot pay the loan back? If you get hurt or fired? What happens if you default on that loan? Assuming that you don't have enough left in your account to cover the balance? It is very short sighted to think that way! Reduce you contribution to 0 and use that money to help with your expenses or whatever! While it looks good on paper you couldend up paying big time in the end! Just my advise.

Worst case senerio is you get taxed on the distribution. This is not life ending. More than likely, the IRS will file an amended claim with the Trustee if you already owe back taxes or you can work out a payment plan with them. Bottom line, 401K loans are the way to go if you are in a desperate state. I just took one out last week and I am saving my home as a result.