Taking money out of retirement while in Chapter 13

[charmd]

My husband and I filed Chapter 13 in April and our case was confirmed in October 2010.

We kept out house and are making payment. Unfortunately, we just found a termite problem that is going to be quite expensive. At this point the only way we can pay for the repair is to take the money out of retirement. Is this possible while paying the trustee or will we have to give him the money?

If we can not pay for the the damage out of our retirement then I don't know if we are going to keep the house.

Can we re-negotiate out BK and give the house back? We are upside down approx $60,000.

Thank for any thoughts

[lrprn]

Contact your lawyer to discuss your options in this situation. In some local courts, taking cash from a protected retirement account could give your trustee reason to request that the cash be seized for your creditors.

You can ask your lawyer to amend your plan to surrender the house when that's the best financial option for you and your family.

Understand that giving up the house may decrease your expenses significantly and therefore might change your monthly Ch 13 payment as a result.

However, if what you owe on your house is a lot more than the house is worth in today's market, it may not make sense to plow a large amount of money into it on top of what you already owe.

The best thing is to sit down with your lawyer and figure out what makes the most financial sense in the long run given your individual situation.

[Cristo]

For what it's worth, I am in Maryland and several lawyers told me that I could take money out of retirement accounts if I needed to.

[charmd]

Thanks for your thoughts. I will discuss with my lawyer.
It may be where we just need to let the house go, but I understand your point about having to pay the trustee more if we no longer own the home. It is hard to walk away since originally that is what we were trying to save but even with the lien strip we are upside down so will have to do some real number crunching and try to leave emotions out of it.

Someone in a thread once said "we are a renter with owners responsibilities"! They sure seem right now!

[MOMof3]

We found out that taking money out of retirement accounts isn't as easy as you'd think (if you aren't of age to do it). I would have had to quit my job and do a cash out to touch mine, so I'd check out your plans requirements for hardship withdrawal. What about a 401k loan? Is that available to you? You could modify your plan to include your new payment if you needed to. I don't think the trustee is going to consider your problem an expense that can't be justified. If I were that upside down though, I think I would try to walk.

[charmd]

The money is not in a 401K. We had to move it in 2008 when my husband's company stopped offering a plan and we rolled it over to some sort of annuity plan.
Has anyone had luck after the BK is confirmed to get a loan modification? We should have done this before filing, but since I did not know if we could do a lien strip I did not try to modify the first. If we can't work out something with the loan then maybe we would be better off walking and completely starting over.