Can someone please tell me the rules for the withdrawls of 401, 457K's during a CH13. I assume that once a case is filed that if one of these type accounts are tapped that it would result in immediate payback to the trustee, am I correct on that? Thanks!!
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I would avoid tapping your 401K at all costs.
If there is a legitimate need, check with your attorney about a loan from your 401K. -
Do NOT touch your 401K for any reason.All information contained in this post is for informational and amusement purposes only.
Bankruptcy is a process, not an event.......Comment
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Actually, there are no rules, per se, with respect to withdrawal of money from a 401K during Chapter 13 bankruptcy. Participation in, contributions to, and payback of loans from a 401K will have already been dealt with prior to filing. The assumption is that the 401K funds will not be accessed until retirement.
The only way a trustee would ever find out about a debtor taking a distribution from a 401K would be if the trustee requires the submission of federal income tax returns. How a trustee might react to the increase in a debtor's income is anybody's guess.
Technically, taking a loan on 401K funds during bankruptcy is not taking on new debt. You are borrowing your own money and paying yourself back, with interest. The only question would be relative to the debtor's ability to pay back the 401k loan without affecting the ability to pay the Chapter 13 payment each month.
It is generally a bad idea to tap into sheltered assets during a Chapter 13. Always check with your attorney on all such matters.Comment
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I agree please do not touch your 401k.Comment
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Thanks for your opinions. I was actually thinking about working for another 3-4 year's, am on a 60 month plan and possibly wanted to remove funds from my retirement fund to buy a house outright.... Will probably just wait now till I get my discharge in about 5 years to buy a place, who knows what the real estate market will be then....Comment
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