How is 401K viewed

[momxx5]

Is a 401K viewed as an asset?

DH lost his job on Wednesday. We are highly considering taking the 401K money and use it for some expenses. We will really need this money and are well aware that is will screw up our taxes next yr, etc. But with the time value of money it is almost a necessity that we use this money.

How will that affect our BK filing?

I am thinking that we will file by month end, and then after 341 meeting withdraw the 401K money.
How does that sound.

We are not talking about a whole lot of money.....thanks to the great losses incurred when stocks went crashing.

Thanks in advance.

[banca rotta]

If you have to raid it then the best thing would be to roll it over into an IRA which will still be exempt and just withdraw what you need to live on. You can only have money in the bank equal to your state's exemption or you will lose it for certain.

You will pay 10% penalty on your withdrawals plus be taxed as income for whatever you withdraw. This will have to be paid by April 15th next year to the IRS.

Again please don't put it in a regular bank account then file or it will be taken by the trustee!!!!

Good luck

[lrprn]

Is a 401K viewed as an asset?

Yes, but it's a protected asset that the trustee can't touch.

DH lost his job on Wednesday. We are highly considering taking the 401K money and use it for some expenses.

I understand. However, I beg of you please do NOT take the money from his protected retirement fund!

My concern for you is that if you aren't paying your unsecured cc's, etc. and still can't make ends meet to the point you have to liquidate part of his 401K to get above the financial waterline, then filing bk may not help you very much.

If this is the case, then you have two choices - either reduce your expenses further or figure out a way to bring in more income. Otherwise you could end up bleeding his retirement dry eventually making up the difference whenever something out of the ordinary happens.

How will that affect our BK filing?

Withdrawing 401K funds within six months of filing will require you to add the amount withdrawn to your gross income on the Means Test.

I am thinking that we will file by month end, and then after 341 meeting withdraw the 401K money. How does that sound.

That prevents adding it as income. However, see my comments above about needing to take out 401K money to make up shortfalls after filing.

Truly I'm not intending to sound judgmental...just asking some 'tough love' questions to find out if your post-bk income vs. expenses will provide enough left over every month to ensure you can make it over the long haul without continuing to count on the 401K as a way to make up the difference.

[Clouddancer]

Yes, but it's a protected asset that the trustee can't touch.

I understand. However, I beg of you please do NOT take the money from his protected retirement fund!

My concern for you is that if you aren't paying your unsecured cc's, etc. and still can't make ends meet to the point you have to liquidate part of his 401K to get above the financial waterline, then filing bk may not help you very much.

If this is the case, then you have two choices - either reduce your expenses further or figure out a way to bring in more income. Otherwise you could end up bleeding his retirement dry eventually making up the difference whenever something out of the ordinary happens.

Withdrawing 401K funds within six months of filing will require you to add the amount withdrawn to your gross income on the Means Test.

That prevents adding it as income. However, see my comments above about needing to take out 401K money to make up shortfalls after filing.

Truly I'm not intending to sound judgmental...just asking some 'tough love' questions to find out if your post-bk income vs. expenses will provide enough left over every month to ensure you can make it over the long haul without continuing to count on the 401K as a way to make up the difference.

For a hardship it would be income, but not for a 401K loan, right??

[AngelinaCat]

If you can't meet your minimum payments for anything now, what makes you think that raiding the 401k is going to help? We raided my husband's trying to meet the minimums and couldn't do it. So we threw good exempt retirment income down the toilet trying to stave off the inevitable BK and could not do it.

So we lost that income, and are having to pay a tax penalty on top of that.

The best thing anyone can do right now that has a 401k---IS TO FORGET ABOUT IT. IF YOU ARE NOT RETIREMENT AGE, IT DOES NOT EXIST.

PLEASE....leave it alone!! You will end up better in the long run.

[JRScott]

Don't raid your 401k.

[Help!]

Don't do it!!!! Not only did we lose 30% to taxes, but our case was nearly dismissed because it could be seen as income. We lost all of it to the trustee, and as if that wasn't painful enough, it hurt us in ways we couldn't even imagine later. Because it was counted as income for 2008, it put us into a tax bracket in which we couldn't deduct all the things we used to (childcare, medical expenses, student loan interest, and we lost the child tax credit for our 3 kids). We ended up owing more than $10K this year!!! OUCH!! We are very lucky that we have been living like misers since discharge and putting every dime in savings. If we hadn't, we wouldn't have been able to pay the tax bill and we'd be in debt all over again. Please don't make the same mistake we did!