Withdrawal from 401K

[ONEBADAPL]

I took a loan out from my 401k to pay for my son's college and I got denied for a parent plus loan in the amount of 6k. I can only take 1 loan from my 401k so now I have to withdraw funds. My question is, I'm meeting with attorneys to file for bankruptcy Ch 7 this week and the funds will be direct deposited in my checking account, should I be concerned? I have the letter from Direct Plus loan that I got denied and that's the reason why I have to take funds out of my 401k to pay for my son's college.

Any info will be appreciated.

Thank you...

[tcreegan]

Hi ONEBADAPL,

funds will be direct deposited in my checking account, should I be concerned?

Yes

Once the funds "comingle" with your regular funds they become regular ol' cash for the BK trustee to go after. Spend it on legit expenses (lawyer fee) or see if you have any exemptions to cover it. Or keep it separate and rely on recent court rulings that say it is not income. Definitely something to ask about during your consultation with the lawyer!!

Good luck with the filing, hope your son is doing well in college!

Tom in Colo