OK to apply for a 401-K loan?

[simon2020]

I'll keep this simple.

I am in a 100% plan.

Need car repairs.

Have 401-K loan that I found I can tap 50% of the balance. Will need only $1,000 to $2,000 -- way lower than I am able to tap into.

I can pay loan back anytime with no penalty and stretch the payments up to 5 years at a low 2% fixed rate.

Is it ok for me to get this loan or is it jeopardizing my plan. In essence I am borrowing against myself and not a regular creditor like a credit card.

Your thoughts.

Thank you.

[justbroke]

Probably not okay in the general context of "can I take this loan without asking". You should consult with your attorney, because I don't know how it is handled in your District (or mine for that matter).

Re-read your Confirmation Order. There should be a paragraph in that Order limiting or otherwise restricting your ability to obtain new debt. While a 401(k) loan is a loan from yourself, you are taking exempt property and converting it into non-exempt property (cash).

You will probably need to talk to the Trustee about this. If you have a bonafide emergency, the Trustee can suspend some or all of a payment or payments, and allow you to catchup the payments later.

Other than that, I don't know what to tell ya.

[Flamingo]

When you have ANY financial decisions to make during your Chapter 13, ask your attorney. Your financial estate is under the control of your Trustee during your Plan years and you need to discuss any loans or credit decisions with your attorney. This forum is fantastic but your attorney shiould give you the OK/decline, not anyone else.

[HHM]

Instead of the 401K loan (bad idea), you have the option to get a temporary forbearance in your chapter 13 payments for these types of 1 time expenses. So long as the repairs are necessary.