Pay for Atty with????

[Winger19]

Hi,
I'm wondering if I can take out a loan on my 401 to pay for my Atty. I can't imagine any other way I'm going to be able to come up with the money.

It would also be one more expense to go onto the means test.

Do you think the trustee would have a problem with that?

[SinkingFast]

Yep!

Taking on new debt on the eve of filing BK will look fraudulent to the Trustee. To the BK Court in general.

We wanted to do a cash out refi of our truck to pay our income taxes and the attny said Nope. Same reason. We had to sell the truck instead, to pay the taxes.

You may have to do what others have done. Stop paying CC payments to get the money together.

[Winger19]

Jeez....I don't know what to do then.

I only have on current CC that I'm paying on. The $20 a month won't make a dent.

I'm filing mainly because of a $700 a month garnishment from a summary judgment. Any other ideas?

[LostOne0069]

You MIGHT be able to do a 401k loan since it technically isn't "debt" since you're borrowing from yourself and you pay yourself back.... good question to ask an attorney during your free initial consultation.

[DisneyGirl]

I think asking an atty is a good idea. We took out a 401K loan to pay for some unexpected car repairs but that was a couple weeks AFTER we filed the paperwork. Good luck!

[aa06a47]

Hi,
I'm wondering if I can take out a loan on my 401 to pay for my Atty. I can't imagine any other way I'm going to be able to come up with the money.

It would also be one more expense to go onto the means test.

Do you think the trustee would have a problem with that?

Shouldn't be a problem in my opinion, but you might want to wait 90 days or so after doing so to file.

[Winger19]

Thanks! I'll definately be bringing it up during my free consultation.

I wish I had 90 Days to wait but this garnishment is absolutely killing me. Hopefully it won't be a problem.

[SinkingFast]

We were looking to borrow the money from a bank. At that point, we were gonna need a co-signer as our Credit had already gone down the tubes. So we arranged for a co-signer as well.

Decided to check with the attny before actually taking the loan. The attny put the skids on it.

The attny said it would look fraudulent to the Court for us to go and take on more debt when we hadn't been paying our Creditors the money we already owed them. And on top of that, to take on a loan on the eve of filing BK would add insult to injury. The Trustee could consider taking the loan against the truck to pay our taxes as fraudulent behavior on our part.

Taking a 401K loan to pay your attny may be legit. Your attny may say it's perfectly alright. Just that was our experience with trying to borrow against equity in a vehicle to pay our taxes to the IRS.

In your case, you're looking to borrow from yourself. In our case, we were looking to take on additional Secured Debt to pay a Priority Creditor. The Secured Debt woulda been deductible on the Means Test as well.

[anonymuse]

Maybe if you take it out straight (not as a loan) it would be alright, but you would have the penalities to pay to the IRS.

[axeshifter]

Hi,
I'm wondering if I can take out a loan on my 401 to pay for my Atty. I can't imagine any other way I'm going to be able to come up with the money.

It would also be one more expense to go onto the means test.

Do you think the trustee would have a problem with that?

I have 4 loans outstanding on my 401k. I'm 98% confident in telling you that any activity associated with a 401k is exempt and even if it isn't legal fees (bk lawyer fee) is exempt from the trustee. We sold stock that we owned to pay for our bk lawyer and a lawyer to adopt my stepdaughter. That action was not questioned by the trustee. Of course consult an attorney, but ours (who has done over 4000 bk cases) claimed that legal fees of any kind are always exempt in a bk case. Also I believe that the government completely protects 401k from all institutions. If the IRS can't touch it, nobody can. I think.?!