chapter 13

[ndhlpnw]

I may file chapter 13 (im really nervous) and i have a 401k loan-will my employer findout im filing?

[kornellred]

Your employer's payroll department might find out about your bankruptcy if your trustee requires that payment be made by wage deduction. Your 401K loan payment is a legitimate expense in Chapter 13 filing and it will reduce your disposable monthly income, and correspondingly reduce your Chapter 13 plan payment.

[Flamingo]

Probably not as your 401(k) loan payment will probably continue to be paid out of your paycheck as usual - ours was...check with your attorney.

[mrinsane]

They won't know unless you have your chapter13 payment taken directly from your paycheck. Your 401k payment will continue coming out of your paycheck as plan to pay off your loan. When you pay off the 401k, the trustee will arrange an increase to your chapter13 payment.

[CCB35]

as stated before,if your trustee requires wage garnishment your company will know.Mine did and as soon as she got the letter,my supervisor called me and asked if i knew anything about it

[shellbell]

I am in Pennsylvania and my 2 401K Loans were NOT included in my repayment plan. My attorney strictly stated that I was NOT to pay them. All Loan payments that were taken from my paycheck by my payroll department were stopped. Needless to say I ended up defaulting on both loans and they were 1099'd. I had to claim them on my Income Tax as Income. I am sure it is different in every state and with every Trustee.

[leverage]

I am in Pennsylvania and my 2 401K Loans were NOT included in my repayment plan. My attorney strictly stated that I was NOT to pay them. All Loan payments that were taken from my paycheck by my payroll department were stopped. Needless to say I ended up defaulting on both loans and they were 1099'd. I had to claim them on my Income Tax as Income. I am sure it is different in every state and with every Trustee.

So your trustee basically forced you to incur more debt with the taxes and penalties that come with the default?

[IamOld]

So your trustee basically forced you to incur more debt with the taxes and penalties that come with the default?

Or was your atty just...clueless in this sense?

[jange]

I am also in PA, my 401K was not included in my payment plan and I continued to have the amount withdrawn from my pay. I did not include it on the matrix of the creditors, so no notification goes to your company.
My lawyer asked several times if I was required to pay it back...yes....and the amount was used to lower my DMI. The trustee never questioned it except to note I had a 401k loan, no step up plan by the trustee. I didn't think it was something you could stop, since payroll deduction is part of the repayment agreement.

[brtb]

as stated before,if your trustee requires wage garnishment your company will know.Mine did and as soon as she got the letter,my supervisor called me and asked if i knew anything about it

I'm going through this now. Our trustee requires wage garnishment and I'm just mortified about my employer finding out. I'm giving the trustee the Payroll Dept's address, so I'm hope it just stays there and doesn't get out. I have the utmost respect for my manager and we work well together and if he finds out I will be so humiliated, especially since I work in the Finance dept. How did you get through this?

[LadyInTheRed]

I am in Pennsylvania and my 2 401K Loans were NOT included in my repayment plan. My attorney strictly stated that I was NOT to pay them. All Loan payments that were taken from my paycheck by my payroll department were stopped. Needless to say I ended up defaulting on both loans and they were 1099'd. I had to claim them on my Income Tax as Income. I am sure it is different in every state and with every Trustee.

Or was your atty just...clueless in this sense?

A clueless attorney, I think. It doesn't vary by state. Section 1322(f) of the bankruptcy code is very clear that the terms of a 401k loan cannot be materially altered by a Chap 13 plan and the required payments on the loan are not considered DMI. http://www.law.cornell.edu/uscode/us...2----000-.html

I consulted with an attorney who didn't know that. I told her what I learned on bkforum. She looked it up and called me after our consultation to tell me I was right. She was pretty new to BK and I give her credit for admitting the error. But, I went with a different attorney.

[shellbell]

I guess my atty just wanted all of my income free so I could be successful paying the Plan payments. Good thing about my trustee is that she never once asked for my yearly bonus or my income tax refund to go towards my Plan payments. I'm not complaining. I am just happy I have 2 more payments and I'll be free of this forever.

[kornellred]

shellbell - quite frankly, you got screwed, unless the law has changed in the past three years. I am paying back my 401K loans outside my Chapter 13 plan. They are allowable expenses that get subtracted from disposable Monthly Income.

[shellbell]

It is what it is. I'm just counting the days.