When the 4O1K loan is paid back....

[hada76]

I have a 401K loan ($600/mo) and a car loan that will be paid off in a few months. (I will need another car but can't afford it now) I am planning on filing CH 13 really soon. Will they re-evaluate the DMI after the payoff or the payback amount will probably remain the same? Currently, our DMI is in the negative and when these are paid off we will be positive.

[catleg]

Yes they will want to increase the ch13 plan payment by the same amount as the loan payments.

So, it pays to look into taking a new 401k loan and/or new car loan since you'll just be handing the money over to unsecured creditors (unless you have taxes or secured debts that need to be paid in the plan).

They will ask you this before the 341 and/or confirmation. They (panel trustees) know most peoples' 401k loans are under 5 years duration. So they try to force you into a "step" plan.

[lrprn]

I have a 401K loan ($600/mo) and a car loan that will be paid off in a few months. (I will need another car but can't afford it now) I am planning on filing CH 13 really soon. Will they re-evaluate the DMI after the payoff or the payback amount will probably remain the same?

If you are filing a 13, then it's likely that your trustee will realize that these loans are nearly paid off on your filing date. Unlike Ch 7s where your bankruptcy estate is set on filing day, Ch 13s can look forward. It wouldn't surprise me if your trustee wanted your payment to increase after the car loan is paid off. Also some local courts don't allow paying back a 401K loan during Ch 13.

Have you set up 3-4 free initial consultations with experienced bk lawyers in your area? Have you already hired a lawyer to file your 13?

I'm curious...if you have no disposable income currently with the loans in place, why are you waiting to file Chapter 13 rather than filing Chapter 7 now?

[hada76]

Filing CH 7 is preferred but because our household income is well above the median income, we are being told that most likely CH13 is our only option. total household gross income is high but we have a very heavy mortgage on our 1st property. Our disposible income is still a negitive if you consider the 401k loan repayment so how it is viewed/ treated is critical, I think. We will provide our lawyer all our expense details this week. We have an investment property with a HELOC which we will give up. Only my husband will file as the "issue" items are exclusively in his name. We have so many questions regarding what expenses are considered and what the limits are.

[catleg]

A lot depends on your state.

Figure on using the IRS limits for most categories plus actual secured debts, 401k loans and 401k contribs.

Some districts are tougher than others.

[lrprn]

Filing CH 7 is preferred but because our household income is well above the median income, we are being told that most likely CH13 is our only option.

There is no way to predict if you can qualify for Ch 7 until an experienced bk lawyer completes your Means Test and Schedules.

We've had several over-$100K-income members who were able to file Ch 7 and be successfully discharged. You need to retain a knowledgeable and aggressive bk lawyer who isn't afraid to stand up and fight for you if your trustee or the US trustee file objections. If an experienced bk lawyer completes your Means Test and Schedules and both show less than $100 disposable income, then you really do qualify to file Ch 7 and should be able to do so regardless of your income.

We have so many questions regarding what expenses are considered and what the limits are.

Please keep asking your questions - we'll help you sort things out as best we can.