borrowing during Chapter 13

[Sheltie1]

We are 29 months into a 43 month plan. We abated 2 payments due to illness and missed work in 2003 and 2004. We also fell almost 2 months behind in payments until my wife started a wage order in October 2005. Since then all our payments have been made on time. Trustee has not contacted us or threatened us in any way.

My question is: I know our handouts from the trustee say that we can ask to borrow up to $2500 with trustee approval. Will that raise any red flags? The money would come from my 401(k) in form of a loan. I had 2 loans coming into the bankruptcy and on will be paid off soon. We are paying more into the plan than we should have to because I am contributing more into my plan ( in the form of loan payments) than the law would allow.

We asked our attorney about borrowing from my 401(k) to pay off after 36 months so we could buy a home and sell our manufactured home that is in the plan. He said the trustee would probably not let us "borrow from Peter to pay Paul."

Any info on borrowing would be greatly appreciated...I need tires, brakes, dish washer, pay personal property taxes, etc.

Thanks.

[SinkingFast]

The attny is probably right about borrowing money for a down payment on another home. Even from yourself thru a 401K loan. Since you are seeing light at the end of the tunnel on your plan, over the half way mark, you only have to wait another year. Then your in the clear and free to do what you want. All you have to do is wait another year and your done.

As to the other issues,............. Brakes, dishwasher, personal property taxes,......... You could get estimates for the repairs needed, and your tax bill, and ask your attny to ammend the plan temporarily to get you the money you need to pay for these things. The Trustee could allow you to make lower payments for a few months to get you the extra cash you need for those necessities.

[aa06a47]

I am not sure if the trustee will give an abatement or amendment for things like normal repairs to your car, as they were probably shown as monthy expenses in your original chapter 13 plan. If he would, he would need you to prove how those expenses actually increased. (for example, if they used 100/month as repair, you would have to show that in the past year, your repairs were more than 1200 total)

One thing, and I am probably not qualified to give advice here because I have only lived it for 19 days, but I feel I have got to use a envelope system if you will (my envelopes will be a savings account) for those "soft" figures the attorneys give for monthly averages. Example, your average utility bill is 200/month, you have a good month, no Heat or Air and it is 100. You gotta put that 100 in the saving account because you will get that 300 bill soon.

[13inOR]

I am not sure if the trustee will give an abatement or amendment for things like normal repairs to your car, as they were probably shown as monthy expenses in your original chapter 13 plan. If he would, he would need you to prove how those expenses actually increased. (for example, if they used 100/month as repair, you would have to show that in the past year, your repairs were more than 1200 total)

One thing, and I am probably not qualified to give advice here because I have only lived it for 19 days, but I feel I have got to use a envelope system if you will (my envelopes will be a savings account) for those "soft" figures the attorneys give for monthly averages. Example, your average utility bill is 200/month, you have a good month, no Heat or Air and it is 100. You gotta put that 100 in the saving account because you will get that 300 bill soon.

Good point, AA. Or if you dont go to the Dr for 3 months in a row, and you allow $50 per month for copays, save that up because it could be that one month your whole family gets sick and needs office copays as well as prescriptions. Its hard to do, but its about the only way to make it.

[jane taylor]

We are using envelopes for savings, too. It does take getting used to, but it does work. We have wanted to do that for some time now, but haven't even been able to do that. We've only been doing this for two months now and so far we've done pretty well. We are saving as much out of my husband's raise as we can since we know that our plan payment will probably go up next year.

[aa06a47]

Good point, AA. Or if you dont go to the Dr for 3 months in a row, and you allow $50 per month for copays, save that up because it could be that one month your whole family gets sick and needs office copays as well as prescriptions. Its hard to do, but its about the only way to make it.

Exactly, I have life insurance I pay twice per year. If I don't save that 12/month they allow for it, I'll be 12 / month short when the bill comes due. Same with vehical / home repairs. That 70/month they are giving me for that won't even cover the next time my furnace goes out more than likely. So, best be prepared.

[13inOR]

Or average your heating/electrical bills over the year, and save the difference on the months it is way less, like summertime. Then when they are huge in the winter, its easier to make up. We lived this way for about 20 months and believe me its not easy but its the only way to be successful at it. Hopefully we learned good habits to carry over the rest our lives!!

[Sheltie1]

next question...........

We have played strictly by the rules, but how is the trustee going to know if I do get a new 401(k) loan to replace one that is getting paid off?

[13inOR]

well, they may not ever know. But if they did find out, it could be a problem.
I am just not sure. They only thing I know for sure is that I had to stop contributing to my 401K.

[aa06a47]

We have played strictly by the rules, but how is the trustee going to know if I do get a new 401(k) loan to replace one that is getting paid off?

Well, one, where are you going to deposit this windfall of money...probably a bank account, who might monitor your bank account...trustee....who knows about money going in and out of accounts...government.

You might very well get away with it, however, why risk it. Do it correctly, and you shouldn't have a problem.