I was reading some articles on google regarding ch 13 and 401k, and that you're 401k is protected. There was something interesting that I read about someone asking if they can take a 401k hardship withdrawal while in ch.13. The lady said that before she filed she has a primary residence and a rental property and her mortgages were current. Now she is 3 months late on her primary residence and got a letter for her mortgage company and that she can take out some money from her 401k hardship withdrawal to prevent a foreclosure and would be current but she doesn't know if she has to tell the trustee because it is her own money. She didn't say if she spoke with her attorney though. Any opinions? I thought it was interesting.
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One thing to keep in mind is that if you do take a hardship withdrawal then you cannot contribute to any of your 401k or 403b retirement accounts for 6 months. If she is putting in money and has less DMI due to that it may be a problem.Filed 11/17/11 Chapter 13, 341 meeting 12/21/11. Plan confirmed 1/19/12 - DISCHARGED 12/16/15
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Couple things come to mind.
1. Taking a withdrawal will count as taxable income. Showing a large increase in income for the year could cause problems for her.
2. More importantly, why has she fallen so far behind on her mortgages? Does she need to consider amending her filing to give up the house? Possibly convert to a 7? What will prevent her from falling behind again?
3. Turning exempt funds into non-exempt funds is RARELY a good idea.Filed Chapter 13 on 2-28-10. 341 completed 4/14/10. Confirmed 5/14/10. Lien strip granted 2/2/11
0% payback to unsecured creditors, 56 payments down, 4 to go....Comment
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Sounds like a hypothetical questions...we can't really comment without anyway to gather facts. You are asking us to comment on an "article" you read "somewhere," (and you didn't even provide a link).
Please don't ask purely "what if" questions. We are here to help real people with real problems. If you have a question about taking a 401K withdrawal, then ask it.
Now, the short answer to the question...can she take a 401K withdrawal in an active 13, sure; should she and will it cause problems...depends.Last edited by HHM; 01-12-2012, 07:47 PM.Comment
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Could someone in a CH13 borrow from their 401k? This is not a taxable withdrawal at this point so will not be considered income on taxes.11/23/'10-filed ch 13. 1/6/'11-341, confirmed. Below median. Plan completed 11/30/2015. DISSCHARGED 4/4/2016.JPComment
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Depends, understand, a 401K loan creates a mandatory expense. Can the person afford to take the loan, make their chapter 13 payment, make the 401K loan repayment and pay all other necessary living expenses (in most chapter 13's, not likely).Originally posted by spidge View PostComment
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I did this without permission and the trustee found out and we had to go back and go through the court to get approved to take a loan. They looked at it as taking on debt. You need permission from trustee! We got caught when she asked for our pay stubs (showed us paying back loan) , took a fit!!!!!They can ask for pay stubs and taxes at any time and ours does!!!!!!Filed Chapter 13 - 7/10/07 - 5 year plan with 2 cars and 10% unsecured payback,
Last Payment 7/12, DISCHARGED 11/26/12
CLOSED 12/18/12Comment
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So what happened to you? Did this affect your plan in any way?Originally posted by katztoo View PostFiled 11/17/11 Chapter 13, 341 meeting 12/21/11. Plan confirmed 1/19/12 - DISCHARGED 12/16/15 Comment
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She put in a motion to dismiss because we took on "debt" without permission. A big headache but the lawyer filed the papers with the court to take on debt (our heat had gone out in the winter=hardship!) after the fact and they approved it. Our payment did go up at that time though because of a slight (3%) pay raise and I had changed our health plan over to a health savings (she said the health savings is not an allowable expense) so our monthly payment went up $120.00.
Lesson learned: DON'T DO ANYTHING OUT OF THE ORDINARY (FINANCIALLY) WITHOUT CONSULTING YOUR LAWYER!!!!!!)Filed Chapter 13 - 7/10/07 - 5 year plan with 2 cars and 10% unsecured payback,
Last Payment 7/12, DISCHARGED 11/26/12 CLOSED 12/18/12Comment
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I just got a 2.7% raise which ends up being .47/hour. My attorney said to notify her if I get a significant increase which she said was 10% or more. I'm surprized they raised your payment for just a 3% raise.Originally posted by katztoo View PostFiled 11/17/11 Chapter 13, 341 meeting 12/21/11. Plan confirmed 1/19/12 - DISCHARGED 12/16/15 Comment
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