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    #1

    401K Loan Before Filing

    I searched the forum and didn't find an answer. If I took a 401K loan before I filed how is that looked at? Would it cause any problems with filing. I'm not looking to do it just to increase my expenses or anything like that the payment amount would be minimal, like $8 per pay. There are just some things we need the money for.

    Also, we thought about cashing out our life insurance policy, the cash value is worth a little over $2000, but am I correct in thinking that would be considered income?

    Thanks!
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    #2
    Does anyone know? Please help. Sorry to be a pain, but we haven't found the right lawyer yet and it's pretty much impossible to get answers from anywhere but here until that happens. Hopefully our consultation on July 5th is with the guy that will be our lawyer. I have my hopes up on this one.

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      #3
      Originally posted by irb View Post
      Does anyone know? Please help. Sorry to be a pain, but we haven't found the right lawyer yet and it's pretty much impossible to get answers from anywhere but here until that happens. Hopefully our consultation on July 5th is with the guy that will be our lawyer. I have my hopes up on this one.
      You would have to look up your states exemptions to be sure about a couple of things. First, I would want to know if taking exempt money (your 401K) and withdrawing some of it would make the money non-exempt. Same with the life insurance policy. We don't know what state you are in, what your exemptions are, or how you plan to use the money (vacation or to pay your attorney?).
      Filed Chapter 13 02/2006 - Confirmed 05/2006 - Discharged 09/2011
      I'm not an attorney. My replies are merely suggestions or observations, not legal advice. As always, consult with an attorney before making any decisions.

      Comment

        #4
        Thanks Newbie2. I'm in PA. The amount I'm looking to take as a loan is $1000. That's the lowest amount we're allowed to take. Unfortunately what happened is that my wife has a vacation scheduled a few months from now that she didn't have to pay for. Her friend's husband was nice enough to pay for them to go. The only thing not covered is my wife's spending money that she would need to go.

        If there was a way out of this vacation we would certainly be getting her out of it, but it is a no refund policy and we can't have her not go since she didn't pay for it.

        Not sure if you read my other post about Avon, but she really wants to quit doing it and this would also help towards that goal.

        Would it be better to wait until we have filed? We're hoping to file next month. I just don't want to take the loan and then have the money taken off us. We don't have equity in anything car and house are both negative equity and $1000 won't create an exemption problem since we have no savings and live paycheck to paycheck.

        Comment

          #5
          Originally posted by irb View Post
          Thanks Newbie2. I'm in PA. The amount I'm looking to take as a loan is $1000. That's the lowest amount we're allowed to take. Unfortunately what happened is that my wife has a vacation scheduled a few months from now that she didn't have to pay for. Her friend's husband was nice enough to pay for them to go. The only thing not covered is my wife's spending money that she would need to go.

          If there was a way out of this vacation we would certainly be getting her out of it, but it is a no refund policy and we can't have her not go since she didn't pay for it.

          Not sure if you read my other post about Avon, but she really wants to quit doing it and this would also help towards that goal.

          Would it be better to wait until we have filed? We're hoping to file next month. I just don't want to take the loan and then have the money taken off us. We don't have equity in anything car and house are both negative equity and $1000 won't create an exemption problem since we have no savings and live paycheck to paycheck.
          If you think the money would be exempt, then you shouldn't have any worries. But you may be asked by the trustee what you did with it, so be prepared to answer honestly. (Doubt much would come of it though..)

          One other thing you may want to double check - make sure that by taking the money out it isn't considered income. I don't know the answer to that, perhaps someone else will.
          Filed Chapter 13 02/2006 - Confirmed 05/2006 - Discharged 09/2011
          I'm not an attorney. My replies are merely suggestions or observations, not legal advice. As always, consult with an attorney before making any decisions.

          Comment

            #6
            OK, thanks for the info. Hopefully someone else takes a look at this and answers. That's my big question if it's considered income. We're already over the median but I think with a good lawyer we could pass for a 7 based on our DMI. I'm still not even sure if the 7 is the way to go either because we have the possibility of the 2nd lien strip with a CH13.

            I guess all this confusion and issues are normal for everyone. I'm sure most people aren't just a straight answer without any little bumps (that seem like mountains) in the road.

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