quick bk7 question..

[iamprose]

Hi all, would be a great help if anyone can comment on loans from 403b retirement acct. before filing BK7, especially whether it is considered income or not. Iam on Long Island. Thanx

[AngelinaCat]

I am not that familiar with 403b accounts, but I will tell you what I tell people looking to borrow or liquidate 401k plans before you are of retirement age--DON'T DO IT. Do not even THINK about it. Those retirement accounts are protected, and BK cannot touch them.

If you start borrowing, or liquidate them, there will be huge IRS penalties to pay. I know you have all the best intention to repay in the allotted time period before the penalty happens, but *LIFE* has an unfortunate way of inserting itself into your plans. So just don't do it.

'Hub and I first borrowed from, and then ended up liquidating his 401k. We probably have about two more years to pay off those tax penalties--which accrue interest, penalties, and interest on the penalties. We may never get it paid off before one of us dies.

We could sure use that exempt money now.....

[daylate]

In my opinion it is not income, it is a loan. Now the tricky part comes as AC says if you lose your job it will become taxable income if you don't pay it back within 2 months, (I think is the time period) after losing your job. If that were to happen before you file, then it would be income for the means test, I guess. Another potential problem is whether or not the repayment is allowed on schedule J in a Chap 7. In a 13 it is, but I'm not sure about a 7. Bottom line, I'd be very careful in this situation.

[tobee43]

403b is the same as a 401, difference is, you must work for a non profit org right???

the b is protected the same as the 401, so i also suggest, don't touch it!! it's exempt money while in bk, that you can use someday when you really need it. if you do cash it the trustee will make you account for every dime and it can be a potential mess for you. i cashed ours in the BIGGEST mistake ever!!!!

[iamprose]

I am not that familiar with 403b accounts, but I will tell you what I tell people looking to borrow or liquidate 401k plans before you are of retirement age--DON'T DO IT. Do not even THINK about it. Those retirement accounts are protected, and BK cannot touch them.

If you start borrowing, or liquidate them, there will be huge IRS penalties to pay. I know you have all the best intention to repay in the allotted time period before the penalty happens, but *LIFE* has an unfortunate way of inserting itself into your plans. So just don't do it.

'Hub and I first borrowed from, and then ended up liquidating his 401k. We probably have about two more years to pay off those tax penalties--which accrue interest, penalties, and interest on the penalties. We may never get it paid off before one of us dies.

We could sure use that exempt money now.....

Thanks for the great advice AngelinaCat. Love your 'miracle' n 'worry' qoutes. With nowhere to turn for any monetary help right "now" I need this option to relieve the pressure. If it gets me back on my feet now, I can replace it n more later. Lost a 20yr accounting job overnight. Returned to school for a little more secure job in a hospital where I can work all the doubleshifts I want(but not if the current financial stress kills me first). Iam keeping it simple with no assets(house, car, etc.). I just need to lay out in front of me all the possible ramifications, so Iam prepared. I understand all the irs rules, I just want to be sure of what a BK trustee could do. I feel pretty much covered, but for the question regarding, if I choose BK, could a 403b loan amount push me from 7 into 13. I believe there's some debate about retirement distributions being income or not, and I think it varies by district. I just want to be certain before I pull the trigger on a loan amount now. Enjoy your day.

[iamprose]

In my opinion it is not income, it is a loan. Now the tricky part comes as AC says if you lose your job it will become taxable income if you don't pay it back within 2 months, (I think is the time period) after losing your job. If that were to happen before you file, then it would be income for the means test, I guess. Another potential problem is whether or not the repayment is allowed on schedule J in a Chap 7. In a 13 it is, but I'm not sure about a 7. Bottom line, I'd be very careful in this situation.

hey daylate, like the way you think. it's not income, it's a loan(and without a creditor). I just haven't found confirmation of that yet. Prefer to not use the free BK attorney consults if not going to file. I understand the sizable tax bill if not repaid. Iam not too worried about another job loss, as I supplement my full time position with per diem work for different employers, where it seems they would make me full time. Don't see a problem whether the repayment is allowed on schedule J in a Chap 7, as I will set it for 5yrs. My expenditures are still high in NY. Considered heading south into the mountains for a while where I can live for a song. Really appreciate your bottom line advice, you be careful out there too n choose to have a wonderful day!

[IamOld]

403b is the same as Tobee said as the 401k - it's just for non-profits. A loan is not income BUT I think it would help if need be to show what you spent it on...BUT just also make sure that you can show that it's a loan (prinout from 403b administrator).

[iamprose]

403b is the same as a 401, difference is, you must work for a non profit org right???

the b is protected the same as the 401, so i also suggest, don't touch it!! it's exempt money while in bk, that you can use someday when you really need it. if you do cash it the trustee will make you account for every dime and it can be a potential mess for you. i cashed ours in the BIGGEST mistake ever!!!!

Hi tobee43, are you neighbors with daylate in Nunavut? I do work for a non profit. Iam going to setup the loan as a line of credit, within the 403, with checks and plastic, so every penny will go directly to basic living expenses. So sorry to hear your BIGGEST mistake ever, n AC n others too. This is the time I really need it(the first time ever). It really helps alot that I can try to learn from them, n go cautiously, while keep mutterin a motto from the old infomercial sales/per minute recordholder, Tony Little (who doctors had told would never recover from his bad car accident) "Things will always work out ok if you just remember that things will always work out ok".

[iamprose]

403b is the same as Tobee said as the 401k - it's just for non-profits. A loan is not income BUT I think it would help if need be to show what you spent it on...BUT just also make sure that you can show that it's a loan (prinout from 403b administrator).

Thankyou too much for the headsup bout having the 403b printout. Iam still looking for that state statute quantifying that it is not income, so I can be certain. Think I may need to talk to a local attorney. Thanx again for your help. Choose to have the best day ever!

[IamOld]

Thanks!!! A loan by definition is not income...and yes if you are contemplating a BK atty PLEASE talk to one asap!!!! NY/NYC area has many :-)

Thankyou too much for the headsup bout having the 403b printout. Iam still looking for that state statute quantifying that it is not income, so I can be certain. Think I may need to talk to a local attorney. Thanx again for your help. Choose to have the best day ever!

[tobee43]

Hi tobee43, are you neighbors with daylate in Nunavut? I do work for a non profit. Iam going to setup the loan as a line of credit, within the 403, with checks and plastic, so every penny will go directly to basic living expenses. So sorry to hear your BIGGEST mistake ever, n AC n others too. This is the time I really need it(the first time ever). It really helps alot that I can try to learn from them, n go cautiously, while keep mutterin a motto from the old infomercial sales/per minute recordholder, Tony Little (who doctors had told would never recover from his bad car accident) "Things will always work out ok if you just remember that things will always work out ok".

LOL!! yes, daylate and i live really close to each other but i only see 'em at night!...late.

just WAIT until after your done with your bk. i just wish just like AC was saying we never touched the money. it would have been wondrous to have had it after our bk was over to help us begin our "new" lives. but, it all worked out anyway.

we used the money to try and bob water, and i KNEW better, just couldn't let go of the guilt of it all. that's why it was such a big mistake. i'm glad your making a SOUND plan to move forward

[iamprose]

LOL!! yes, daylate and i live really close to each other but i only see 'em at night!...late.

just WAIT until after your done with your bk. i just wish just like AC was saying we never touched the money. it would have been wondrous to have had it after our bk was over to help us begin our "new" lives. but, it all worked out anyway.

we used the money to try and bob water, and i KNEW better, just couldn't let go of the guilt of it all. that's why it was such a big mistake. i'm glad your making a SOUND plan to move forward

Hi tobee43 I would love to WAIT, but my heart and adrenals have had their fill of stress now, it could get very unhealthy not to buy some breathing room 'now'. I have no doubts, n see a small percentage of the 403 as a kinda cheap life insurance. Nothing going to the credit cards I lived on after I was fired n went back to school. They will WAIT a long time. I jus want to feel sure if I choose BK later that Iam not missing something now. The very last thing I want is to find my last resort of BK7 was somehow dismissed and I am left at the mercy of creditor lawsuits/judgements for years to come. Like I mentioned, my heart doesn't take kindly to those type surprises anymore. Feels jus like someone has reached inside, grabbed ahold n won't stop squeezing(hard). Gets very difficult to breath then too, hence Iam happy to go to the only place left where I can buy a little time. I don't plan to waste any of it. namaste'

[IamOld]

iamprose, I truly sympathize, I do - believe me, even when I feel relaxed, I remind myself NOT to ever relax. My spouse says I'm not happy unless I'm miserable. Who knows...at any rate, BELIEVE ME I know - and many many others here know what you are going through.

I think a good panacea would be to see a few good BK lawyers. You won't be alone in this on LI, by no means!!!!!!!!!!!!

[iamprose]

iamprose, I truly sympathize, I do - believe me, even when I feel relaxed, I remind myself NOT to ever relax. My spouse says I'm not happy unless I'm miserable. Who knows...at any rate, BELIEVE ME I know - and many many others here know what you are going through.

I think a good panacea would be to see a few good BK lawyers. You won't be alone in this on LI, by no means!!!!!!!!!!!!

Iam glad u r not sellin cars, because I don't want one, n I didn't want a sit down with any lawyers(maybe until I decided to file anyway) but u sold me now(if I didn't.. I don't know if u would ever stop trying). Please tell your spouse that I know u r not miserable, because if u were u wouldn't care. Thanx, choose to have the best day ever

[IamOld]

LOL!!!! You know I am told that I tend to depress people :-) But just truly understand what you're going through.

One thing I have learned and folks here always say, is that even if BK is but a gleam in your eye, PLEASE do go talk to a few BK lawyers...had I done that, then I would not have paid...let me see - about almost $3K per MONTH from Nov through March (2010 thru 2011) for debt that I could not pay anyway, and is in spouse's CH 13 and hopefully will be in my 7.

My atty always says that many folks show up late - true. If we had talked to atty earlier (and God knows I actually CANCELED an appt I had set up in Sept of 2010 - idiot me) I would have saved!!!! about $12K!!!! So essentially, I flushed $12k down the toilet. That's my story :-)

Iam glad u r not sellin cars, because I don't want one, n I didn't want a sit down with any lawyers(maybe until I decided to file anyway) but u sold me now(if I didn't.. I don't know if u would ever stop trying). Please tell your spouse that I know u r not miserable, because if u were u wouldn't care. Thanx, choose to have the best day ever