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funds for 401k loan in limbo?

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    funds for 401k loan in limbo?

    I've learned from my time spent reading on this forum that funds used to pay 401k loans are actually considered income, not an expense. So while a person filing for ch 7 can not claim those funds as an expense, how do those funds get handled when figuring expenses?

    Say the 401k loan payment is $400 a month. That $400 is then included in the monthly income. Then when totaling all expenses say you come out as being -$100 DMI, you would actually, in reality, be -$500 DMI because you don't actually have access to those monthly funds to use for living expenses because the loan is still being paid, even though it's not counted as an expense.

    Say if we claim that we need $800 a month for food for a family of 5, just using the food expense as an example, in actuality because we don't receive that $400 a month we actually have access to only $400 per month for food. Wouldn't a trustee question this?

    It seems as though those monthly funds for 401k loans are actually funds that sort of hang in limbo. Can't be counted as an expense and at the same it isn't income, in the sense that that money is literally not being received by the person, it's coming straight out of the paychecks and the person never sees it.

    How does this work? I'm curious because we have a 401k loan that we are re-paying and when I include those payments amounts as income then subtract expenses we are in the negative. But because we never see that money we are actually really really negative.

    I guess I'm concerned that a trustee would look at our income and expenses and see that part of our income that we are claiming to live on actually goes to a 401k loan and we aren't really living on it. Is this even an issue? Would a trustee even care?

    If our loan was paid off and we had that money to live off each month we'd still be in the negative after expenses so I'm not sure if this is an issue or not. It's just really confusing.

    Man I hope I made sense with all of this.
    Filed Chapter 7 April 29th, 2010
    341 June 1st, 2010
    Report of No Distribution June 2nd, 2010
    Discharged and Closed 8/10/2010

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