Good or bad idea?

[PdxDavid]

We filed on Sept. 30th. Our 341 is on Nov. 9th.

We checked the box to surrender the cars. I didn't really want to, but that decision is behind us.

We don't want to get a loan for some crazy amount for an insane amount of years again. That is partially what got us here in the first place.

Our plan is to take a loan from my wife's 401k to buy cars for cash. We are talking 10-15k. Is there a time line to think about here?

Thank you for any advice/info.

[AngelinaCatHub]

It is universally not advisable to raid you now exempt future. You will be paying an enormous amount of interest in penalties and taxes. REAL bad idea. 'Hub

[PdxDavid]

I was under the impression there were no fees/penalties. She calls Vanguard. She gets a loan and they take it out of her check each week. I know that there is a certain percent of interest involved but they say you are essentially paying it back to yourself. Am I off base here?

[Hope2File]

I've done loans from my 401k before. There shouldn't be any taxes or penalties unless for some reason you don't end up paying it back. The only problem is you could be missing out on market gains during the term of the loan.....but on the other hand you're paying interest to yourself, not to some subprime lender.

I'm not sure about waiting until discharge or anything like that......

[CityFarmer]

401k loans are not considered debts, since you are essentially borrowing money from yourself. The payments cannot be claimed as an expense on a chapter 7, but since you've already filed, that isn't an issue. Personally, I'd wait until the case is discharged and closed just so it doesn't raise any red flags anywhere. Maybe it wouldn't be a problem, though.

How stable is your wife's job? With the current economy, is there a possibility that she may be subject to a future "workforce reduction" (or "rightsizing" or whatever silly term they use)? If that happens, the remainder of the loan may come due as a lump sum, and if it isn't paid, it will be considered an early withdrawal that is subject to tax penalties.

[PdxDavid]

401k loans are not considered debts, since you are essentially borrowing money from yourself. The payments cannot be claimed as an expense on a chapter 7, but since you've already filed, that isn't an issue. Personally, I'd wait until the case is discharged and closed just so it doesn't raise any red flags anywhere. Maybe it wouldn't be a problem, though.

How stable is your wife's job? With the current economy, is there a possibility that she may be subject to a future "workforce reduction" (or "rightsizing" or whatever silly term they use)? If that happens, the remainder of the loan may come due as a lump sum, and if it isn't paid, it will be considered an early withdrawal that is subject to tax penalties.

Her job is fairly stable. In an ironic twist she is in collections. Let the flaming begin.

[CityFarmer]

Her job is fairly stable. In an ironic twist she is in collections. Let the flaming begin.

LOL! I suspect that is one industry that is doing quite well these days!

[OhioFiler]

Her job is fairly stable. In an ironic twist she is in collections. Let the flaming begin.

Now that is funny!

[music12]

i would say it's a bad idea. better to buy a crappy car for a while until you can get a reasonable financing.

[Flowers]

Pdx - I got a good laugh for the day given the industry your wife works in!
In any event, there are places you'll be able to get a loan for a car there have been threads on this, or like music12 said get a crappy car.

[calgirl67]

DO NOT TOUCH YOUR FUTURE!

Don't even think about it. That is your retirement you are pilfering. You are going to need every cent of it 'cause the government is not going to be able to take care of you.

Please don't touch it to pay bills now.