A few different conversations going on here....
Can you take out a 401(k) loan, grey area (practically, yes, you can, legally, since the 401(K) loan may affect plan payment, could be a problem if you do so without trustee permission) ...is it advisable to do so, NO.
1. The main problem with a 401(K) loan in chapter 13 is how it affects your disposable income; so long as you are at your employer, the payback is mandatory and deducted from your check, so it puts the success of your plan in jeopardy.
2. As Justbroke wisely pointed out, the BIGGER issue is the budget problem. A properly budgeted chapter 13 shouldn't require any such contingency. You CAN build that contingency into the chapter 13 (albeit, not directly) and if something does come up, you CAN go back into the chapter 13 and make changes, i.e. temporary forbearance, reduction in monthly payment, etc.
Investment vs withdrawal.
There is a BIG difference between simply selling under performing assets WITHIN the 401(k) and actually withdrawing the funds from the protected status. I guess, in the extreme, if the investment vehicles allowed in the plan are so crappy, then maybe take them out, but nearly every plan has at least a money market holding account (granted, interest rates are low). And even if that is the case, then simply roll the funds into an IRA with more investment choices. Thus, I am hard pressed to think of a scenario where using retirement funds to pay present debt makes financial sense. "You just never do it".
The 401(k) issue goes to mind set. Yes, the 401(k) is a bank, but it is a bank for your FUTURE, not your present. In reality, the large class of baby boomers hitting retirement that did not save for retirement are going to break this economy (I am figuring out how I can do my job and telecommute from Ecuador
). Lesson, leave the 401(k) alone, there is ALWAYS another option that does not involve borrowing against your future.
Can you take out a 401(k) loan, grey area (practically, yes, you can, legally, since the 401(K) loan may affect plan payment, could be a problem if you do so without trustee permission) ...is it advisable to do so, NO.
1. The main problem with a 401(K) loan in chapter 13 is how it affects your disposable income; so long as you are at your employer, the payback is mandatory and deducted from your check, so it puts the success of your plan in jeopardy.
2. As Justbroke wisely pointed out, the BIGGER issue is the budget problem. A properly budgeted chapter 13 shouldn't require any such contingency. You CAN build that contingency into the chapter 13 (albeit, not directly) and if something does come up, you CAN go back into the chapter 13 and make changes, i.e. temporary forbearance, reduction in monthly payment, etc.
Investment vs withdrawal.
There is a BIG difference between simply selling under performing assets WITHIN the 401(k) and actually withdrawing the funds from the protected status. I guess, in the extreme, if the investment vehicles allowed in the plan are so crappy, then maybe take them out, but nearly every plan has at least a money market holding account (granted, interest rates are low). And even if that is the case, then simply roll the funds into an IRA with more investment choices. Thus, I am hard pressed to think of a scenario where using retirement funds to pay present debt makes financial sense. "You just never do it".
The 401(k) issue goes to mind set. Yes, the 401(k) is a bank, but it is a bank for your FUTURE, not your present. In reality, the large class of baby boomers hitting retirement that did not save for retirement are going to break this economy (I am figuring out how I can do my job and telecommute from Ecuador
). Lesson, leave the 401(k) alone, there is ALWAYS another option that does not involve borrowing against your future.
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