Loans During Bankruptcy

[banannas]

If the roof on our house needs to be replaced, could you take out a loan on your 401k and would the trustee have a problem with it since it needs to be done and I'm repaying myself back at 0% intrest?
Thanks Banannas

[Flamingo]

That is something that you would need to take up with your attorney because no one knows what your trustee would tell you; Some may allow it some may not. Depends on the amount, your financial situation...Taking out loans from one's 401(k) during a Plan reduces the amount of your income available to you to live on during your Plan giving you another payment due during your plan and withheld from your income. Trustees do not want you to take out any credit or loans during your Plan without their permission. Also, with an added payment, you may not to be able to make your Plan payment or pay other bills and your Plan could fail. Discuss with your attorney.

[AngelinaCatHub]

Hitting your future income is the worst thing you can do. It is too easy to just walk away from. It stops your 401k from using the miracle of compound interest on that amount. You are screwing yourself big-time. Your roof can wait for cash. Put a tarp over the leaks. In Florida this becomes a norm after a hurricane. Almost a status symbol. I’ve been there, done that. Not wise, not now. Please think this out. ‘Hub

[Minnymouth]

Also, the Trustee is going to want to know what caused the damage, storm, etc and why your homeowners insurance doesn't cover it.

If you are just suffering from and "old roof" then you may have to wait. Then again the Trustee may let you borrow from your 401K. Its kind an "up in the air thing" with Trustees.

There was a tarp on my roof (after a storm) for almost 3 years, because the Trustee "seized" the insurance checks for the damage and paid it out to other creditors!!!!!

Then I had to pay for new roof out of my pocket...............

So see............... you may be tarpin' too!!!!!!

[liz417]

Also, the Trustee is going to want to know what caused the damage, storm, etc and why your homeowners insurance doesn't cover it.

If you are just suffering from and "old roof" then you may have to wait. Then again the Trustee may let you borrow from your 401K. Its kind an "up in the air thing" with Trustees.

There was a tarp on my roof (after a storm) for almost 3 years, because the Trustee "seized" the insurance checks for the damage and paid it out to other creditors!!!!!

Then I had to pay for new roof out of my pocket...............

So see............... you may be tarpin' too!!!!!!

Wow! Your trustee is tough!

[TiredandWeary]

Also, the Trustee is going to want to know what caused the damage, storm, etc and why your homeowners insurance doesn't cover it.

If you are just suffering from and "old roof" then you may have to wait. Then again the Trustee may let you borrow from your 401K. Its kind an "up in the air thing" with Trustees.

There was a tarp on my roof (after a storm) for almost 3 years, because the Trustee "seized" the insurance checks for the damage and paid it out to other creditors!!!!!

Then I had to pay for new roof out of my pocket...............

So see............... you may be tarpin' too!!!!!!

God, that's horrible!! Unscrupulous! I mean, for cryin' out loud, I don't see how they can rightfully take claim to the money issued by your homeowner's insurance policy that is meant strictly for the repairs or replacement of your roof! I can understand the trustee maybe wanting to oversee the entire repair process or maybe to take any amount that is left over after the repairs, but to seize the entire insurance claim payout before anything actually gets repaired...that seems totally illegal in my opinion! Can't this be challenged in a court? I mean if you are honestly using the money to make the roof repairs, then that is what you are paying monthly homeowner's insurance premiums for in the first place!! This makes me really angry for you and the situation!

[wooisme]

i can assure you my home owners association would write us up for a violation and take us to court if we didn't fix our roofs especially the way our roofs show from the street! it's in the bylaws that we have to do what they say, so the trustee would HAVE to let you fix it. i never heard of such a stupid thing in my life. they don't expect you to hold open an umberella in your house while you sit at your dinner table. that's nuts

also the homeowners association would NOT permit a person in my neighborhood to TARP their house. It goes against the bylaws....you most certainly can NOT get around your homeowners association if you live in a neighborhood who has one.

[Frogge]

I am starting to get the idea that Trustees are working for the creditors, and not for the person that owes the money...? LOL

[Flamingo]

I am starting to get the idea that Trustees are working for the creditors, and not for the person that owes the money...? LOL

Remember, it is the Trustee's job to get as much money for the creditors as possible. Some of the stuff you read in here is horribly true; bankruptcy is not easy and creditors want the money owed them. Look at it this way, if someone owed you several thousand dollars and you knew where they lived and drove by one day and saw new siding or a new roof on their house, I'm sure your temperature would rise.... :-) Unfortunately, many folks don't like to look at the reality of the situation and from another viewpoint.

If there is a leaking roof causing a health hazard and that can be proved to a trustee, there would never be a problem as to getting it repaired. Our roof was new with our house in 1978 and still the original roof when we filed in 2002. We started having bad leak problems a few years thereafter and had to buy out early to get the new roof on in 2006. We would have never made it to the end of our original 5 year plan as we would have probably incurred a horrid mold problem on top of everything else. When we bought out of our Plan we also obtained the extra funds for the roof, new guttering and a new front window that also need to be badly replaced.

[Frogge]

I know, I just can't believe the extent that they go sometimes, to pay the creditors.. when you consider circumstances like a roof over your head, so to speak.

It's very helpful to me to listen to your perspective, Flamingo.. I know it's a normal tendency to view big CC companies as cold heartless companies that can take losses here and there, who cares? ..and I agree with that to some extent, however, I also side on the "you made your bed" viewpoint, and agree that I AM the one responsible for the decisions I made and the creditors were accomodating someone that paid their bills and they could make some money.

They gave me access to the spending, and I spent.

[jgarton244]

I would suggest that the extent of the damage your current roof is in would dictate how you fo forth. If it is in really bad shape, with water running down the walls after each rain, a tarp will probably not hold. Here in Kansas, after a tornado took off several roofs, they were tarped. Then a week later another storm with 70mph to 80 mph winds hit, and blew the tarps off. Many of those homes then had additional costs in drywall, mold issues, etc.

If your roof problem is minor, with just a few buckets to catch rain in a heavy storm, I would wait. If it is so damaged that waiting could result in much more costs to repair later, then ask attorney about 401k loan. Yes, you lose the compounded interest, but on a $6000 loan, for five years, in this market, if you have funds in fixed plan you could expect about 4.5% interest yearly. So you would lose around $1500 in the five years. If you would have damage in that period that would add more than $1500. due to not repairing now, it makes sense financially.

Borrowing from a 401k is a last resort, and should not be done without some serious thought and good legal advice. You will see many opinions on this issue, but ultimately, you need to decide what makes sense financially for you in the long run.

[Mary Irene]

What I find fishy is that the Trustee's make a percentage of what we pay. So the more we have to pay, the more they earn. Why doesn't the government just pay them a salary and not a fee from us? It makes me think that they want to make the plan as expensive as possible so that they earn more money. My Trustee (in West Michigan) has a reputation of being really tough and mean and believe me, she is. My laywer told me she made a woman with a brain tumor cry when she was badgering her about her payment amount.

[BKParalegal]

I think we should all just hold hands and sing " Day by Day"