Couple of Questions: 401k loan? Authorized CC User?

[MOMof3]

Can I take out a 401k loan w/out getting trustee permission? It is a secured loan, right? I guess it's still debt though--so it's probably a no-no.

My parents (they are super!!) want to make sure I'm covered if there is an emergency since I'm responsible for their three grandkids. They want to make me an authorized user on one of their credit cards. I don't see why I can't--they are the ones w/the account?

Thanks BK Forum!!

[HHM]

1st question, a practical question...what do you need the loan for? Is it absolutely necessary and there is no other way?

To answer your 401K question, a 401k loan is not a loan at all. The issue with the trustee is not that you are taking on debt, but that you are altering your budget. Are you really in a position to make the payments on the 401K loan plus your regular living expenses, PLUS your chapter 13 plan payments.

As for becoming an AU on your parents CC, there is no problem with that. Just don't use the card unless there is an emergency.

[MOMof3]

Thanks! The 401k question was an "in an emergency" type question too...like a huge car repair or something. I'm not wanting the loan---just wondering if it's available if necessary!

As for the CC---If it makes my parents happy then I will take it--it would surely allieviate the "what if" stress. You never know when something will come up & since I do have 3 kids, I would hate to end up in a bad place. My parents are the type that always want us kids to "wear clean underwear---just in case" --- LOL. I guess it's good to be prepared! This is their way of protecting me.

[HHM]

Fair enough, and I must admit, I was hedging a bit because I don't really know the answer to the 401K question. I suspect that you would NOT have to seek trustee approval to take out the loan (but I could be totally wrong). But you need to weigh carefully the practical consequences of doing so, even in the event of an emergency, could you really afford to make the payment.

Unless your trustee has said otherwise, you CAN use credit cards while in a chapter 13 (assuming, of course, you have one that is still open). But again, the issue is the practical consequences about affording the payment. Many trustees will allow a person to incur new debt (i.e. charge a credit card) of up to $500-$1000+ w/o seeking their permission.

Thus, borrowing against the 401k should be a very very very very last resort.