401K Withdraw

[possumfat]

I know that withdrawing from your 401K to pay unsecured debts is bad but so is paying the finaince charge each month that barely dents the balance.

My question is: my case has been discharged but waiting for closing while the trustee takes his sweet time trying to get a payment from the credit card company i paid in the 90 period before filling. Case was a Chapter 7 filed
under the old laws.

Since the 401K was protected I don't see a problem getting the money to pay off the credit card...............any opinions would be greatly appreciated.

This something I need to do soon !!

[BassBoy]

Persoanally, I wouldn't take away from a retirement plan.

[SinkingFast]

We cashed out our retirement savings to pay bills.

Every attny we saw told us, "Do you know how much money I could have saved you if you'd have come and seen me a year ago?"

Retirement savings are protected in BK. You won't make more than a dent in your Unsecured Debt. Just keep the 401K for when you'll need it when you retire.

[possumfat]

I really do appreciate everyone's advice and concern and I agree with you but when your in a position it has to come from somewhere this is where mine needs to come from. To put it in perspective the withdraw amount is less that 25% of the total 401K balance ).

The thing I need to know is can the trustee somehow get it if I withdraw it and pay the card off ? I don't think so but confirmation would helpful.

[BassBoy]

My understanding is that if you are discharged, you can withdraw from it without any interference from the Trustee.

[SinkingFast]

There have been cases where the 401K withdrawal has been considered in the 6 months CMI. 401K monies are earned income that is directly withdrawn from your pay, pretax. That's why some Courts are including 401K withdrawals in the 6 month CMI.

And if, the balance is in excess of $600, and you pay off the card within 90 days of filing, it will fall into the "Preferential Payments" area. The Trustee can go after the money.

So if you're gonna withdraw from your 401K, you need to ask attnys in your area if the withdrawal will figure into your 6 month CMI. You'll also need to be prepared to wait in excess of 90 days from the date of the payment to be beyond the "Preferential Payments to Creditors" time frame to file BK.

[possumfat]

what is CMI and the 6 month rule ?? Also I file over a year ago (Oct. 5th, 2005) and was discharged on January 17th, 2006.

[aa06a47]

possumfat, If you know your filing bankruptcy then quit paying the unsecured debt, especially if your simply paying the finance charges with money from your 401k. If you not sure when your going to file, simply pay what you can but don't use that asset unless it is a life or death emergency. The creditors cannot get it unless it is setting in your bank account. The second you take the money out, it is money the trustee can get.

[aa06a47]

what is CMI and the 6 month rule ?? Also I file over a year ago (Oct. 5th, 2005) and was discharged on January 17th, 2006.

CMI is current monthly income. The amount is used in the 6 month average to determine if your in a chapter 7 or chapter 13. 6 months is the look back period on income. I believe this is what SF is referring to as the 6 month rule.

[SinkingFast]

what is CMI and the 6 month rule ?? Also I file over a year ago (Oct. 5th, 2005) and was discharged on January 17th, 2006.

Sorry Possum. I didn't realize you'd already filed and been discharged.

You are well past the 6 months from date of filing for the "Windfalls" rule to apply. Even tho cashing out your own 401K wouldn't really be a windfall per se.

The one thing to be worried about is the Trustee possibly reopening your BK under the pretense of some sort of fraud. Not that you committed fraud. But that the Trustee might feel "If you can cash out your 401K now to pay a Creditor, why didn't you do so before you filed BK?" line of thinking. But I don't even see how that would apply.

[treehugger1]

While we are on this topic of withdrawals from a retirement plan, I borrowed against my 403(b), optional, but this a priority unsecured debt that would be paid outside of my plan. Can one borrow against a 401? Better to borrow your own money, if possible.

[CATCHMEIFYOUCAN]

401k

While we are on this topic of withdrawals from a retirement plan, I borrowed against my 403(b), optional, but this a priority unsecured debt that would be paid outside of my plan. Can one borrow against a 401? Better to borrow your own money, if possible.

I thinks its better to borrow, take out what they call a "general purpose," loan if you have the funds. For Example, I borrowed $12,000 a couple years ago to pay off my car loan I had with a credit union, now I'm paying myself back through payroll deduction which goes automatically into the 401k loan with interest (and its not taxed). Now if you take out a withdrawal from your 401k loan, than your slammed with all these penalties at the time and having to pay taxes at the end of the year. The choice is yours!

Best Wishes, Catchmeifyoucan

[cherir]

What credit card are you wanting to pay off? Is this something that was not included in your bk? If you are discharged, isn't it also discharged?

I'm sorry I'm confused. Have you run up additional debt since discharge?

I would definitely look into getting a loan against my 401K rather than liquidating part of it. Not all companies offer it, but worth checking out.

I personally would not be caught paying off any debt that close to a bankruptcy. If it causes scrutiny on your case, I can't imagine that would be good. From everything I have read, trustees can continue to monitor your case for many months afterwards.

[aa06a47]

Sorry Possum. I didn't realize you'd already filed and been discharged.

You are well past the 6 months from date of filing for the "Windfalls" rule to apply. Even tho cashing out your own 401K wouldn't really be a windfall per se.

The one thing to be worried about is the Trustee possibly reopening your BK under the pretense of some sort of fraud. Not that you committed fraud. But that the Trustee might feel "If you can cash out your 401K now to pay a Creditor, why didn't you do so before you filed BK?" line of thinking. But I don't even see how that would apply.

Yeah, now I'm confused (my nature), why are you paying on a credit card if it was discharged in BK?

[NASCAR20FAN]

I'd leave the 401k alone. My suggestion lower the amount you are putting in to 1% so you'll have a little more money to pay down bills. It will not be a whole lot extra since those deductions are pre-tax, but if you keep going on your 401k with the 1% and just bite the bullet and pay the bills down you'll be better off in the long run. Trust me...