Can I borrow money from 401K?

[DivorceRuinedMe]

I just found out that I need surgery and I have to take off 4-6 weeks from work. I'm the only person supporting a family of 6 right now so we need my income to survive. I will need to take a loan out of my 401K in order to pay my living expenses for the time I'm off work (we don't have sick pay so that's not an option). I'm in the midst of my bk set to be discharged in February. I'm an audit and asset case though so I know I won't close for awhile.

Is it okay for me to borrow that money? Will I get in trouble for borrowing it to do this while my bankruptcy is pending?

I'm already sweating having the surgery and now I'm sweating how I'm going to pay for it and the time off I'm going to need.

[dp1969]

Isn't everything related to your pension exempt? I would believe it wouldn't be a problem, being that is is your money that you earned. Not like your taking a loan out from a bank; you are borrowing from yourself. Personally, if I was still at my old job (where my 401k is), I would have but that's my opinion.

Minnymouth just posted this on another thread...http://www.bkforum.com/showthread.php?t=21088

[DivorceRuinedMe]

I finally heard back from my atty. She said it's no problem if I do that. I just couldn't wait to hear that. Thank you dp for responding so quickly.

[CindyLou]

Just remember, that if you seperate from your job before you pay the loan in full, then it will be treated as a taxable dispersment instead of a loan. So if you do not plan on staying at your job until the loan is paid off, it may not be the best idea.

I know, however, sometimes we have to do things that may not be the best option, but sometimes its the only option. I really hope that your surgery goes well!

Best wishes,

[dp1969]

I finally heard back from my atty. She said it's no problem if I do that. I just couldn't wait to hear that. Thank you dp for responding so quickly.

Good for you...less stress. Good Luck and Quick Recovery!

~D

[One Half Full]

do you have any vacation time? The year has just started.

The company I work for does not have "paid sick leave" on the books. It does, however pay for about 4 weeks for sick leave, but basically only if the managers want to keep you-- it is all at their discretion. Even people going into drug and alcohol rehab are allowed a "free ride." FMLA does not pay of course, but it at least keeps you your job.

I broke my leg about 3 years ago. It was a bad splintered fracture, so it took longer than normal to heal. Although I did not have paid sick time, the company paid 1/2 of my income for 4 weeks, and I took 2 weeks vacation at full pay. Of course this meant "getting behind on bills," and was no favor to me because it did eventually lead me to this BK. However it was something. If my illness was worse and required over 6 weeks, then long term disability would have gone into effect.

Perhaps you should have a chat with your benefits manager and see exactly what you have. It cannot be that your company has never had a person with a heart attack or broken leg. They must have some way to keep their employees in such a case if they do not provide sick pay without having them empty their retirement funds.


(Oh, I only found out about their unwritten policy after the accident when I called to find out if I still had a job. The personell employee simply said, "You are taken care of...")

[krielly]

Glad to hear you got the go ahead from your attorney! That's a relief, I'm sure.

I just have a thought, though........Being that you are the sole supporter of a family of 6 and will be out of work, have you thought about applying for some type of public assistance while you are unable to work?

Maybe there is some assistance out there available for you??? I hope you won't be too proud to look into anything that could help you out. It would be a shame to pull a lot of dollars from your retirement, when you might be able to get some public assistance for the time you are out, and simply supplement that with your 401K loan..............

Just something to think about!

Take care
K

[$$only4ever]

Div,

Sorry to hear that you need surgery. Get well quick and I will be thinking happy thoughts for you.

[DivorceRuinedMe]

Thanks everyone for the kind words and advice.

I work for the government and we have nothing but our sick time and vacation time (no short term disability offered through the government). I already used up all my vacation and sick time when I was out with my daughter for 4 months after I had her. I've accumulated a little leave, but I've used it for doctor's visits, when I've been sick or when one of the kids is sick. I think I may have like 20 hours of leave right now. It stinks.

And I found out today that I CAN"T borrow the money from the 401k because I haven't finished paying off another loan that I took out. That loan won't be paid off for another 4 years. so basically, I'm screwed. I will have to ask my family if they can loan me the money and I really don't want to do that. I won't have a choice though. Oh well - it could be worse, it's not like I will die without the surgery - it's just something I need done to correct some serious pain.

[dp1969]

Thanks everyone for the kind words and advice.

I work for the government and we have nothing but our sick time and vacation time (no short term disability offered through the government). I already used up all my vacation and sick time when I was out with my daughter for 4 months after I had her. I've accumulated a little leave, but I've used it for doctor's visits, when I've been sick or when one of the kids is sick. I think I may have like 20 hours of leave right now. It stinks.

And I found out today that I CAN"T borrow the money from the 401k because I haven't finished paying off another loan that I took out. That loan won't be paid off for another 4 years. so basically, I'm screwed. I will have to ask my family if they can loan me the money and I really don't want to do that. I won't have a choice though. Oh well - it could be worse, it's not like I will die without the surgery - it's just something I need done to correct some serious pain.

Div,

Thank God for family. We've borrowed around $16k before we decided to file BK from my parents and they've not required (yet) that we pay them back. We told them we will work it all out in another year.

Again, good luck!

Dp

[krielly]

Please consider pursuing public assistance............
You certainly deserve it!
K