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401-K loan and Profit sharing loan

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    401-K loan and Profit sharing loan

    We have a profit sharing and 401-K loan are they legitimate expenses when completing a schedule J?

    Also are life insurance payments ok?

    #2
    TERM life for yourself (and/or spouse if filing jointly) are OK!!! Whole/universal, no.

    401k loan - I believe so, but others will correct me if I'm not!

    Comment


      #3
      For a Chapter 7, 401(k) loan payments and contributions are not valid expenses, although many people -- and attorneys -- put them on Schedule J. However, the United States Trustee (UST) could challenge the amount. It's a lot of technical maneuvering but the repayment would be allowed in a Chapter 13, so in most cases the UST will do a "hypothetical Chapter 13" to see if you would otherwise qualify for a Chapter 7.

      Your profit sharing loan would also certainly be considered a non-ERISA loan (not related to retirement) and unsecured. Those payments would probably not be allowed as an expense.

      Generally, as stated above, life insurance payments are okay.

      Do you plan to file with an attorney? Are you over or under the median income? In many cases, the UST doesn't bother under-the-median income filers that put 401(k) loans repayments or contributions on Schedule J. However, a person with significant income or just simply over-the-median, may find the UST scrutinizing the Schedule J and challenging expenses.
      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
      Status: (Auto) Discharged and Closed! 5/10
      Visit My BKForum Blog: justbroke's Blog

      Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

      Comment


        #4
        I contributed 7% for 2 years during my thirteen. It stayed in as an expense when converting to a 7. No questions asked. I think the key is to have it in a 13 right off the bat. Everything is worth a try.

        Comment


          #5
          Originally posted by maddog2112 View Post
          I contributed 7% for 2 years during my thirteen. It stayed in as an expense when converting to a 7. No questions asked. I think the key is to have it in a 13 right off the bat. Everything is worth a try.
          Were you under-the-median when you filed Chapter 7?
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog

          Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

          Comment


            #6
            under the median income for Chapter 7, I am filing with an attorney.

            I think I am still ok even if I can't deduct the payments with my DMI.

            Comment


              #7
              Were you under-the-median when you filed Chapter 7? Way over median. That`s why I started as a 13. After 2 years and 60k payback of 122k, I was able to convert to a 7 because of a 20-25K drop in income over a 6 month period.

              Comment


                #8
                Originally posted by maddog2112 View Post
                Were you under-the-median when you filed Chapter 7? Way over median. That`s why I started as a 13. After 2 years and 60k payback of 122k, I was able to convert to a 7 because of a 20-25K drop in income over a 6 month period.
                That would do it if you are over-the-median and have a significant mortgage payment. Additionally, in some Districts, the paperwork is not redone at all. There are some arguments amongst the Districts if you even need to file a new Means Test in a Chapter 13 case that is converted to Chapter 7.
                Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                Status: (Auto) Discharged and Closed! 5/10
                Visit My BKForum Blog: justbroke's Blog

                Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

                Comment

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