401k hardship withdrawal and cp13

[jtrf6]

I searched for this but couldn't find anything on it so forgive me in advance if i missed it.

I'm in the 2nd year of a chapter 13 bk my wife and I are separated and soon to be divorced. I stayed in the house and have been working with a loan modification specialist. I will be starting a too part payment
reduction plan next month. There will be some up front costs associated with this and I was thinking of taking a hardship withdrawal from my 401k to help cover them. My question is will this be considered disposable income to the courts and will it have a negative impact on my BK?

PS. I am aware of all the tax issues and will take out enough to cover them also.

[walkthaplank]

Is there a reason you need to stay in your CH13 and not convert to a CH7? You might be able to use the fact that you (the marital unit) are now paying for two separate households and it might make it so you can convert to a CH7.

BTW, you don't want to pull money out of a 401k if there is anyway possible to avoid it. Like you said, huge taxes/penalties and it is money you will never see again.

[HHM]

Time to get back in touch with your lawyer and really explore your options. Sounds like there has been a major change and either the chapter 13 needs to be modified or converted to a 7.

Don't do the withdrawal, yet. To answer your question, the 401K withdrawal is a non-issue in your chapter 13, as in the trustee isn't going to care. But if you have a large tax bill as a result, or incur more debt, that could jeopardize your case from a practical perspective.

[jtrf6]

As I have said I stayed in the house and had hoped to keep it that's why I'm doing the loan mod. Staying in the 13 strips the 2nd at the end of five years along with all other debt that can be charged off at the end. If for some reason the loan mod does NOT go through than at that time I will convert to a 7.

So now that I've added a little background do you any insight on my question? What inpact will this have on my BK?

Thanks.

[jtrf6]

Time to get back in touch with your lawyer and really explore your options. Sounds like there has been a major change and either the chapter 13 needs to be modified or converted to a 7.

Don't do the withdrawal, yet. To answer your question, the 401K withdrawal is a non-issue in your chapter 13, as in the trustee isn't going to care. But if you have a large tax bill as a result, or incur more debt, that could jeopardize your case from a practical perspective.

I have a call into him as we speak LOL.

[jtrf6]

Right now the house is more important than the tax bill and no more debt will occur other than the taxes as far as I know. I just want to make sure that when I have to pay at the end of the year instead of remitting a return to the trustee it wont mess me up. If thing go right I fully intend to remain in the chapter 13 for the duration if possible.

[MOMof3]

Can you take a 401k loan? I was able to do that a couple years into my plan for some unplanned home expenses. My lawyer ok'd the monthly payment with the trustee (about 100/month).

[jtrf6]

No a loan will not work at this time.

[HHM]

What exactly are these "upfront" costs.

I assume your plan is rolling the mortgage arrears and all costs in the chapter 13 (it has too), so what is the bank really asking for? I'd push back, it sounds like the bank may be double dipping.

Let me ask you this...if you are stripping the 2nd, do you really NEED the modification. What are they offering to do for you? Even if you stripped the 2nd, how far upside down is the house in value?

[jtrf6]

I am just going to begin a trial period next month they are saying that they will move the arrears to the back of the loan if the trial go's well but there are other considerations. And yes I do need the loan mod. My marital situation dictates it if I want to remain in the house. I dread the idea of having to move into a rental house or even worse an apartment at this point that's why I'm asking these questions. I've been told that the bank could ask me for up to 3,000 in costs to redo the loan if thats the way it go's I Mostly just want to be prepared to act on what ever the bank might request at the end of the trial as long as it's within reason.

I think were are getting of the point of my question. I just really wanted to know how the withdrawal will affect my BK.

[jtrf6]

Just got a call from my attorney and he gave me the thumbs up but only after a making sure I was clear on the tax liabilities. Thanks for all who posted you thoughts,

[HHM]

I have never heard of anyone having to pay anything for "costs" for modification. That is total BS.

Personally, I think your fear is unfounded about moving to a rental, I am willing to bet that doing so would be the best thing you could do, convert your case to a chap 7 and simply be done with it.

I question whether the house is worth saving. If you cannot afford the current payment, and the house is upside down in value, and the ONLY reason you are in a chapter 13 was to save the house, that is recipe for future financial disaster.

[espo1357]

The home should be about 31 percent of your gross. If it is higher than 40, you are putting yourself in a bad spot, unless you have equity, of course.

Right now, I am at 31 percent. And even though I am upside down 100k, I am going to stay put because it would be the same as renting.

Being a "homeowner" (the bank is really the owner) is over-rated in many cases.

[minan]

Do you mean the mortgage payment without property taxes and insurance should be about 31% of your gross monthly?