Stuck in the middle!

[Crozier]

I just received the following message from my attorney. Can anyone help me understand what my options are (or may be)?

"I spent quite a bit of time going over and over your numbers. The odd thing is that with the numbers you gave me, you don't qualify for a chapter 7 (i.e., you have too much Disposable Monthly Income; but on the other hand, in a chapter 13, you don't have Disposable Monthly Income from which to make a Chapter 13 plan payment -- the reason for the discrepancy is that in Chapter 13, we are allowed to deduct your retirement deductions and retirement loan repayment deductions from the calculation, while those numbers aren't allowed to be deducted in Chapter 7."

Any thoughts, suggestions, comments?

[Tbornetun]

I have run into this before. You might have to reduce the amount of your retirement contributions to make a Chapter 13 plan viable. Did the attorney have any suggestions to make this work?

[Crozier]

I can't. It is deducted according to my payscale. The real issue is with my credit union. The loan payments from them are auto-deduct as well. They will not release the auto-deduct "option," until the loan is paid. In hidsight, I think calling it an automatic deduction "option," then making it mandatory and irreversible is . . . not fair. I need a tissue or a JD and Coke!

[Tbornetun]

Get a new bank account somewhere else and then let them deduct to their hearts content. Then include the negative account as a debt on the bankruptcy.

[pookieny]

I can't. It is deducted according to my payscale. The real issue is with my credit union. The loan payments from them are auto-deduct as well. They will not release the auto-deduct "option," until the loan is paid. In hidsight, I think calling it an automatic deduction "option," then making it mandatory and irreversible is . . . not fair. I need a tissue or a JD and Coke!

Auto deduct from what? If it's your paycheck, stop having it deposited. If it's just from the balance in your bank account, take out the money. If it's a credit card, call the cc company and cancel the card. Or say it was lost/stolen and they'll give you a new account number.

[klandsb]

I have heard some say 401K loan repayments are considered expense and also heard they arent considered an expense because basically you are paying yourself back..
I currently am paying $280 amth on 2 401k loans... I really want them to be an expense every mth but cant get a clear answer anywhere ???

[Crozier]

The payments are deducted from my paycheck BEFORE I get it. There is a cooperative agreement between my employer and the CU. I went to the payroll dept, they referred me to the CU. Went to the CU, they said it cannot be stopped unless I am paying the loan off. The catch is this; when you apply for the loan, you get a .25% to .50% break on the interest rate if you accept the auto deduction option. So, of course, everyone goes for it. The same goes for the retirement deduction. It is taken before I get paid. The order of priority is: Taxes, retirement, CU loans, union dues, and 401K (which is not my primary retirement source).

Believe me, I would have stopped it months ago, if that was an option.

[Crozier]

I have heard some say 401K loan repayments are considered expense and also heard they arent considered an expense because basically you are paying yourself back..
I currently am paying $280 amth on 2 401k loans... I really want them to be an expense every mth but cant get a clear answer anywhere ???

I spoke to an attorney who said 401K loans, and loans like them, are deductible in a Chapter 13, but not a 7. I am researching that now.

[klandsb]

Please let me know what you find out... You can send a message to me with the info and it would be greatly appreciated... $280 a mth claimed expense would help me out alot.. thanks