to dismiss my 13 or not

[brokenymom]

ok so here are my options. my chapter 13 hasnt been confirmed yet. good chance it wont be as trustee wants to increase my payments by $$700 and i cant afford that. i have the chance to payoff my 401k loan and reborrow to try to settle with my creditors. i only have one secured debt which is thru cap1 who transfered 2 national bankruptcy sevices. they advised me i could keep my vehicle and bring it up to date and continue to make monthly payments. by doing this dismissal it would decrease my monthly payments from 1330 to $500 and leave me alot more breathing room. iam aware that some creditors might not settle but there really isnt anything for them to take.

[forgotten]

You have asked about this a few times, but I haven't seen any follow up answers to questions.

It looks like the trustee wants to increase your payment by $700 because you are paying $700/mo on a 401k loan, correct?

You should be able to propose a step plan that increases your payment by $700 only after your 401k loan is paid off. You will have an extra $700/mo at that time because $700/mo is no longer going to the 401k loan repayment.

Have you talked to your attorney about submitting a step plan to do this? What do they think you should do?

[brokenymom]

to dismiss or not

yes the trustee wanted to increase the amount of 1330 by 700 more month which is what i am currently paying to my 401k loan.. i just got off the phone with the attorneys office. paralegal has since reworked my actual expenses and has brought the number down from 1330 to 590 month. was advised if trustee doesnt accept to go with plan b . cash off the mutual fund and try to settle with my creditors

[justbroke]

I would fight the Trustee. If you are making both contributions and repayments to your 401(k), the Trustee can complain. However, contributions and repayments are allowed, but most Districts consider that either one of them is a defacto "contribution" and you can't have two contributions at once.

Now, the Trustee could say, that once your repayment is done, that $700/month needs to go towards unsecured creditors. Your attorney should be able to work a plan such that once the repayments stop, your contributions restart.

In either case, I'd fight the Trustee.

As to going the "dismiss" and settle route... a Chapter 13 is much more powerful than any settlement is going to be. First, you probably wont be able to settle for less than 70%. Second, they'll want a lump sum or to be paid real quickly (3-6 months). Third, interest will continue to accrue. I will NEVER EVER recommend depleting your 401(k0 to pay for settlements, so unless you have a stash of cash somewhere... you shoudl stick with the Chapter 13 and just have your attorney fight the Trustee.

[brokenymom]

we are going to fight and hopefully win. as for settling with creditors most major banks -boa, chase, citi have their charged off accounts on very low amounts to payback. i know for fact boa ofers in house sif 20% yes 20 to setle b4 they charge them off. the only reason i would use my 401k is to have a much lower payment than $1330 ,onth over 5years. im certainly not depleting it by all means

[lrprn]

i know for fact boa ofers in house sif 20% yes 20 to setle b4 they charge them off. the only reason i would use my 401k is to have a much lower payment than $1330 ,onth over 5years. im certainly not depleting it by all means

Be sure to figure in the taxes you will owe the IRS for the 80% write off from BOA. The IRS counts that as income and it is taxed unless you can prove you are indigent (and perhaps you can).

I'm with JB - cashing out your 401K should definitely not be your first choice - frankly it should be avoided at all costs. I'm glad to hear your lawyer is going to fight the trustee.

Case law is on your side here, and I know because our lawyer challenged our trustee over this very same objection (we were paying back 401K loans as well). After the trustee and our lawyer couldn't find a compromise they both filed briefs and the final decision went to our local bk judge.....and we won! Hang in there!