Is it ok to take 401K loan after 341

[GHG7F0]

I need about 12-15K to fund mostly a separation legal fees and settlement. I had my 341 this past Tuesday. Will I be ok doing this. I live in California. Thanks in advance...

[ttg1]

First of all it's never "OK" to borrow from a 401(k) but sometimes it is necessary.

As for doing it after a 341 meeting reasonable people disagree. Some people prefer to be conservative and not make any big moves until after discharge. Some people are more free-wheeling. Legally, if the petition is non-fraudulent it shouldn't make any difference that you borrowed after the 341.

[btbeme]

I'd wait until after discharge.

A side note, since other people might read this besides you... If a separation, divorce, settlement, etc is in the works before or during a BK, make sure you are being nice to everyone involved. As nice as possible, anyways. Desperate soon-to-be-ex's and their friends and families can play havoc with your filing should someone wish to send an anonymous note to the Trustee about anything they know to be "true" (regardless of whether it is true or simply an invention of their own impulse to get even with you) regarding assets "you might be hiding." Like a colonoscopy, you feel relief when they don't find anything, but a Trustee investigation isn't worth the pain, and they pretty much crawl up the same area.

[AngelinaCatHub]

I'd wait until after discharge.

A side note, since other people might read this besides you... If a separation, divorce, settlement, etc is in the works before or during a BK, make sure you are being nice to everyone involved. As nice as possible, anyways. Desperate soon-to-be-ex's and their friends and families can play havoc with your filing should someone wish to send an anonymous note to the Trustee about anything they know to be "true" (regardless of whether it is true or simply an invention of their own impulse to get even with you) regarding assets "you might be hiding." Like a colonoscopy, you feel relief when they don't find anything, but a Trustee investigation isn't worth the pain, and they pretty much crawl up the same area.

I could not agree more. It is NOT OK to clip your retirement. It is rare that it is ever paid back, the costs are unreasonable with tax and penalties, and really you are not supposed to incur new debt without your Trustee or the Court's permission. I was a victim of a vindictive enemy who squawked all kinds of things to my Trustee. He got the jist of what my enemy was and worked with us to get us through our bk. It cost us, but the UST never got into it, and we learned our mistakes. We had a terrible lawyer. 'Hub

[keepmine]

I need about 12-15K to fund mostly a separation legal fees and settlement. I had my 341 this past Tuesday. Will I be ok doing this. I live in California. Thanks in advance...

I'd be careful with the timing.
Assets rom a divorce within 180 days of filing could become proerty of the bk estate.

From 541 of the code.

(5) Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date--

(A) by bequest, devise, or inheritance;

(B) as a result of a property settlement agreement with the debtor’s spouse, or of an interlocutory or final divorce decree; or

(C) as a beneficiary of a life insurance policy or of a death benefit plan

[AngelinaCatHub]

I'd be careful with the timing.
Assets rom a divorce within 180 days of filing could become proerty of the bk estate.

From 541 of the code.

(5) Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date--

(A) by bequest, devise, or inheritance;

(B) as a result of a property settlement agreement with the debtor’s spouse, or of an interlocutory or final divorce decree; or

(C) as a beneficiary of a life insurance policy or of a death benefit plan

It's time to start to re-court your wife.

[JackBondLove]

It's perfectly fine to access previously exempt assets after the filing. With that said, it could be an issue with your to be ex-spouse if (s)he were also filing BK - but it makes no difference to you. It would make a difference to you if (s)he were to be giving you assets because of the divorce.

[IamOld]

I would say - divorce aside - 401k loans are ok - it is a LOAN not a withdrawal - even with a withdrawal (per my atty) if you spend it on EXEMPT/Allowed "stuff" (legal fee, mort payment, etc.) it's ok. Now, is it GOOD to do this - no. BUt sometimes we have to - period.

[kornellred]

401K accounts generally contain 2 types of deposits: employee contributions which have been earned but not taxed, and employer contributions. Most 401K plans do not allow an employee to "borrow" employer contributions, so the only money you can "borrow" is your own money. You are not really incurring a debt when you "borrow" your own money, and you are also paying yourself back, with interest. Such loans have a small impact on the employer's accounting protocols, but the reason you are cautioned about the advisability of 401K loans is that they undermine the ostensible purpose of the 401K plan itself.

The question of whether it is OK or not is basically a non-issue. If you need to, and your bankruptcy situation allows it, there is no reason not to.

[gmk]

One thing to check before you take out a 401K loan is what happens if you leave the company. In my case, after I left the company, the plan had no provision for continuation of payments. I had three months to repay the loan back in full or I would get a 1099 showing the balance as a distribution. Plans differ but you should look into this aspect.

[AngelinaCat]

If you don't repay this loan back within a 'timely' manner, as the above poster mentioned, you will be hit with an IRS penalty in taxes, which is usually 10%. We are still paying off part of our penalty, among others.