401k repayment

[curtb07]

has anyone had there 401k loan stopped threw chapter 7..i called the company and told them my hardship and they said as long as im with the company i can not have the loan payment stopped.. i would have to default but i cant because it's out of my paycheck ...i didnt not tell them we were filing bankruptcy

[veggirl]

im not sure about that but i wouldnt reccommend it remember you are paying back yourself! you will be glad when the time comes that money is there

[jribe]

has anyone had there 401k loan stopped threw chapter 7..i called the company and told them my hardship and they said as long as im with the company i can not have the loan payment stopped.. i would have to default but i cant because it's out of my paycheck ...i didnt not tell them we were filing bankruptcy

you can't default on a 401k loan- it's your money, you borrowed from yourself. Obviously they will just pull the payment from your paycheck each time- the only way to stop that is if you no longer work for the company. They will then treat it is an unscheduled distrubtion and you will owe taxes and penalities on the money used.

[curtb07]

its only 15,000. loan i have 120,000. in my 401k but it's 200.00 dollars a week taking out is whats killing me.i could use the 800.00 amonth for bills.....i know the tax consequences i'll deal with that at the end of the year....

[veggirl]

i believe that you must repay that loan but are you still contributing to your 401k? perhaps you could take a break from that for awhile? that could get you some extra in your check

[justbroke]

its only 15,000. loan i have 120,000. in my 401k but it's 200.00 dollars a week taking out is whats killing me.i could use the 800.00 amonth for bills.....i know the tax consequences i'll deal with that at the end of the year....

As mentioned, you can not stop a payroll deduction for your 401(k) loan, when you still work for the company. The only way to stop it is to... quit or be fired.

[brokeasajoke]

I actually stopped my 401K loan repayments. I still work for the company. I asked the payroll dept. to investigate it at the beginning of the year, they did and I was able to default on them (I had a couple of loans.) I understood the tax implication and went ahead with it. I generally get a large refund, next year I will not as a result of this. It's actually worked out well for me because I will not have to adjust my tax with holdings in order to qualify for Chapter 7/means test.

My plan is to start repayment next year once I'm on my feet again. I'll be able to reinstate 1 at a time, repay, move on to the next. If I do lose my job, I'll have already paid the penalties and taxes so I should be clear of all that in that event.

Bottom line, it is worth checking out. Just be FULLY aware of the impact it will have. I have a good person in charge of my company's payroll who took the time to investigate and give me the full picture.

[justbroke]

Bottom line, it is worth checking out. Just be FULLY aware of the impact it will have. I have a good person in charge of my company's payroll who took the time to investigate and give me the full picture.

You're right. It is good to check with ones specific company as policies may differ. My company won't allow this, but we can see that your company does.

[brokeasajoke]

The biggest "gotcha" with mine was in regards to distribution. In order to access the distribution, my loans need to be repaid. That or I would need to take the loans as distributions at the beginning of retirement prior to actual cash distribution. In my case, I'm ~35,000 in debt to myself. It would take a while to burn through that in retirement, hence the repayment starting next year. I'm in my mid 30s so I have about 30 years to deal with it. My payroll's default answer was no, but then she checked with the servicer (Wachovia) and came back and gave me a full rundown of my options... If I'd know then (January) that I would be filing BK, I probably wouldn't have done it but it is working out for me in a sense.

I'll never raid my retirement fund again, I know that for a fact.

[curtb07]

i might have to wait till my wife goes on maternity leave..my plan says that if 5 payments are missed it will be delinquent.a letter will be sent and we have 45 days to pay in full our it will be in default,,then they will send 1099r at the end of the year.... she will be out of work from oct till january on disability so no payment will be coming out of her check to repy loan ...hopefull

[aces67]

You can also try to restructure the loan. I know with dh's 401K we can have a max of 3 loans at one time. You may be able to borrow enough to pay off the first loan and stretch the payments out a little longer so that they are lower every month.

I know you say you will deal with the tax penalties but they really are harsh. I would make that my absolute last resort. If you're wife is on disability through her company then they may still take a payment out of her disability check. She may need to have a talk with HR and tell them about your BK and your financial problems and see what they can do to help you.

[klandsb]

Are the 401k loans coming from you paycheck considering a mthly pmt on your means test ???????? I am currently paying myself back about 280.oo mth... Wondering if that is taken into consideration as a expense ??????

[kornellred]

Not sure about Chapter 7, but 401K loan repayments are a valid expense in Chapter 13 which ultimately lowers your disposable income calculation and, hence, lowers your monthly plan payment. The great thing about that is - you borrowed your own money and are paying yourself back. But then again, that's Chapter 13 and not Chapter 7. In determining eligibility for Chapter 7 via the Means Test, I don't see how a 401k loan payment would not be viewed as a legitimate expense. This bankruptcy stuff can get mighty complicated.

[justbroke]

Are the 401k loans coming from you paycheck considering a mthly pmt on your means test ???????? I am currently paying myself back about 280.oo mth... Wondering if that is taken into consideration as a expense ??????

Both 401(k) loan repayments and contributions are not valid expenses in a Chapter 7. Unless you can prove special circumstances, which I have yet to read about anyone successfully doing.