Interested in knowing about 401k Loan treatment

[hada76]

I have several loans against my 401k which i'm repaying back to my company plan. I'm currently in the process of starting my BK. One of the 401k loans is 100% paid in 4 1/2 months which gives me another $500/month. I'd like some imput on how it will be treated through the means test toward ch7 or because i'm so close to pass / fail if it would drive me into ch13. My salary is well above the median but i have a very large mortgage.

Thoughts?

[ssmdem]

Doesn't matter one way of the other as the 401K loans don't count as an expense anyway.

Or let me add - it doesn't count here. It's not a valid expense for getting you into a Chapter 7.

[momofthree]

Ditto the above. The 401k loan is not allowed on the means test anyway, so it's a non-issue in that regard--it won't change what your means test already shows.

Is your schedule J negative?

[401kloaner]

My attorney filed me chapter 7.

• On schedule I (current income) line 4. (payroll deductions) lists other $832.00 for 401k loan pay back.

• On Schedule J line 13 (installment payments) lists d. Other 401k $0.00.

• On Schedule J Line 20 (monthly net income) shows -$724.

• What are your thoughts on this?
• 341 meeting scheduled for July 30th.
• Thanks.

[401kloaner]

By the way...over the median by $11,500.00

[401kloaner]

If I remember correctly what the attorney told me and if the attorney was correct he said that a 401k loan pay back would be allowed as an income deduction in chapter 13 means test or Schedule J and because of the 401k loan pay back I wouldn't have money available to fund a chapter 13 so hence filed chapter 7 ???

Thanks.

[justbroke]

This is all moot. If the 401(k) that's on Schedule I is disallowed, which it should be, then the negative DMI of -$724 with the $832 added back is only $108.00. This is not presumed abuse.

However, I would caution that since you are over the median, the UST will certainly get interested and will pick apart your Schedule J (and Schedule I) for every expense. They only need to find another $80/month and you're in a Chapter 13. Remember, that many courts have found that just because the creditors are likely to not receive much of a distribution in a Chapter 13, that doesn't mean that you qualify for a Chapter 7 discharge.

In fact, many Chapter 13 cases in which the debtor has negative DMI actually end up paying a dividend to unsecured creditors. This is usually due to tax refunds and even increases in income over the life of the case.

If you are over the median and filing a Chapter 7 case, you really need to have strong and defensible numbers on your Schedule I/J and Form B22A (Means Test).

[401kloaner]

What is the tipping point of DMI ($$$) that would put one in chapter 13 vs chapter 7?


Regarding strong and defensible numbers on your Schedule I/J and Form B22A???

On my schedule J, I have...
recreation, clubs and entertainment... $200.00
food...$600.00
clothing...$200.000

What are your thoughts?

[momofthree]

What is the tipping point of DMI ($$$) that would put one in chapter 13 vs chapter 7?


Regarding strong and defensible numbers on your Schedule I/J and Form B22A???

On my schedule J, I have...
recreation, clubs and entertainment... $200.00
food...$600.00
clothing...$200.000

What are your thoughts?

Are you single?

If so, IRS standards only allow $526 a month for all food, clothing, personal care products, household supplies, and misc expenses. You're claiming about double that, expect them to object.

To answer your question, generally if you have at least $180 in DMI each month, they'll push for the ch.13.

[401kloaner]

Hi,

Yes single (divorced). Three children...one is 19 and in college and driving one of my two cars that I pay for the insurance. The two other children are under 18. I have the two minor children 152 days/nights a year. Does this change the IRS standards?

Thanks

[401kloaner]

If I have $180 DMI then does that mean that my chapter 13 monthly payment would be $180?

[justbroke]

There are two numbers that are "tipping" numbers. The first is $109.58/month which sets the presumption of abuse. This presumption can be overcome if that total DMI is less than $182.50/month and the DMI multiplied by 60 is less than 25% of your total (scheduled) unsecured debt. The presumption can also be overcome for special circumstances like medical reasons and military duty.

Some Districts go strictly by the Means Test so if your Means Test shows $190/month in disposable income, your payment to the Trustee will be $190/month PLUS any secured and priority debt that must be paid through the plan. Also, this number can be affected by what's called the "liquidation" test.

[401kloaner]

The only secured debt I have is a car loan..$300 a month...$7500 balance.

[momofthree]

The 2 minor children that are with you for 40% of the year should give you the negotiating power over the food budget. However, I don't think you'll get to claim the extra in the clothing/entertainment sections, especially if you're paying child support each month (not sure if you are...).

BUT, your attorney did submit it with these, and he'll be familiar with how your district trustee views everything, so you may be fine *fingers crossed* Hopefully if you see a trustee objection, he'll go up to bat for you and get you your ch.7.

[401kloaner]

When do you think a trustee objection would begin? Before the 341 meeting? After the 341 meeting? Before the 60 days? At any time? How would I become aware of any objections? Thanks.

I sure wish I found this forum before I retained an attorney.