401(k) loan payback

[slam22]

I have an outstanding 401(k) loan and I would like to pay it off to improve our cash flow situation. We haven't decided to file BK just yet but as time goes on it seems more likely. I can sell my ESOP stock and and some employee stock options to pay it off or I could cash advance and pay it off that way. Any ideas as to ramifications of this if we do go into BK. Thanks.

[lrprn]

I have an outstanding 401(k) loan and I would like to pay it off to improve our cash flow situation. We haven't decided to file BK just yet but as time goes on it seems more likely. I can sell my ESOP stock and and some employee stock options to pay it off or I could cash advance and pay it off that way. Any ideas as to ramifications of this if we do go into BK. Thanks.

Here's your first problem - cashing in stock options will add to your income if you file bk in the next six months. If your income is close to the income median for your state and family size, that could push you into a Ch 13.

And here's your second problem - taking a sizeable cash advance from one of your credit cards and then filing within three months could trigger an objection from the creditor. And god forbid you take a payloan loan or something like that - terrible idea!

The best thing you can do right now is set up 3-4 appointments for free initial consultations with experienced bk lawyers in your area. Find out where you stand with lawyers who are familiar with how your local trustees deal with situations like yours. Best to know before you do anything what's the best option for your family in the long run.

Good luck - keep posting - we'll help you sort things out as much as we can.

[slam22]

Thanks for the info. I've planned to have an attorney handle this process all along. I never thought the day would come when I would be making 90k a year and having to file BK. Having your wife lose her job and owning a home in Southern California has opened this door. We are just about at the end of the road. Thanks again for the help.

[lrprn]

Thanks for the info. I've planned to have an attorney handle this process all along. I never thought the day would come when I would be making 90k a year and having to file BK. Having your wife lose her job and owning a home in Southern California has opened this door. We are just about at the end of the road. Thanks again for the help.

What's happening to you is happening to others all over the country. So many families are just a job loss, major illness, accident, or divorce away from financial disaster. Hope everything works out for you, slam.

Do come back to keep us posted on how things are going, ask questions, and support others here like you and me who find ourselves where we thought we would never be.

[uofaguy]

Slam22 - it was interesting for me to read your post as it is somewhat similar to my situation. We are facing seen to be foreclosures on a few investment properties in which the builder sailed off into the sunset and left many of us with unfinished homes that are underwater. I am trying to figure out my course and have met with 5 different BK attorneys.

2 months ago I cashed out a ton of stock options trying to get the homes finished & sold. I also took out a 401k loan. Things have not worked out & now I have significantly higher gross income because I exercised the stock option. My advice would be to only exercise those options if it truly will help you avoid BK. Otherwise, I would be very leery of it possibly increasing your income such that you are forced from a Ch. 7 to a Ch. 13.

Also, for me the 401k loan was a good thing to have if I eventually have to file BK as (according to the attorneys I have spoken with) I will be able to repay the loan if forced to a chapter 13. I would prefer to repay myself that money in BK than to have that additional money go to a creditor each month.

As LPRN stated, start having some initial consultations with attorneys. You may hear different strategies from them (as I have), so be sure to schedule a few meetings. Also, search this board as it has been very helpful for me. I wish I had found it sooner. Best of luck.