I have a loan on my 401k, can that be discharged thru chap 7?
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Filed Chap 7: Oct 2009 ; 341 mtg: Nov. 2009 ; Discharged: Jan 2010:
Credit score Aug 2010: 648
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I'm not sure...but its technically money that you owe yourself... When I left the country last year I had a 401k loan that they just cleared by writing it off as a withdrawl from my account and made me pay taxes on it. Then I didn't have to pay it back. It is technically your own money, so not sure why you would want to discharge it.BK Ch 7 Discharged 09/2009 | Anything I say can and should be used as friendly advice and sharing of experiences with an unbiased viewpoint.
Scores: EQ 745 EX 704 TU 710 as of 08/15/2012 -
Amy26 is right. You can have the loan closed, but I warn you, there is a significant IRS penalty and taxes that will be levied. You are best to pay yourself back in the long run, if you can. Getting it discharged, will not stop the tax penalties, and some sort of 1099 WILL be issued. 'HubOriginally posted by atvbutterfly View PostIf I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.Comment
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I wanted to discharge it or at least stop the payments that are coming out of my check. But I don't want to pay those stiff penalties, nor do I want any 1099 surprises up the road.
Best to just keep paying it back, like you said, I am paying myself. I benefit.
thx!Filed Chap 7: Oct 2009 ; 341 mtg: Nov. 2009 ; Discharged: Jan 2010:
Credit score Aug 2010: 648Comment
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You cannot discharge a 401K loan, strictly speaking it is not a debt because you have borrowed money from your self. As was previously mentioned, you can cancel it, at which point it gets treated as an early withdrawal and all associated taxes and penalties will be applied.Comment
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Yes, trust me, from experience you want to keep it and make good on it. When I left the country I didn't plan on coming back to the US, so they liquidated my 401k (it wasn't much...like 7k total) and I paid an early withdrawl fee and then had to pay taxes on it. Wasn't terrible ...but now I'm back in the US and I have no 401k... lol. Course, I was losing money on it left and right before I closed it out...but would have been nice to had the option to roll it over or still have a piece of that left.BK Ch 7 Discharged 09/2009 | Anything I say can and should be used as friendly advice and sharing of experiences with an unbiased viewpoint.
Scores: EQ 745 EX 704 TU 710 as of 08/15/2012Comment
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sorry to say but you are stuck on the 401 loan. either pay it or take the tax hit thats it nothing else you can do.
Sucks huh.
I have 3 401k loans right now 2 from my employer and 1 from my wifes.
with the money i have saved not paying my mortage I will use to pay them off as soon as i get my discharge.
Otherwise it can be used as leverage in a ch 13.Comment
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