Pay off a 401(k) loan 90+ days before filing

[Slingerland]

I know I've seen this answered before, but I can't find the link. I would like to ask a quick question, please:

I have two 401(k) loans that I'm paying back. The balance on one is $7500, the balance on the other is $1100. I'm considering filing in August (another attorney meeting next week.)

If I were to pay off the $1100 401(k) loan now... waiting at least 90 days before filing... is that a preferential payment? I seem to remember somewhere that paying off a 401(k) loan is considered paying myself.

Thanks, everybody!

[catleg]

No, because it's not an unsecured debt. Only an unsecured debt can be a preferential payment.

[Slingerland]

Thanks!

[HHM]

You should be fine, so long as that is your only issue. If you have other "borderline" items, then you may start running afoul the "totality of circumstances" analysis.

[catleg]

You might be better off placing those funds into some other exemption bucket, rather than paying off the loans.
401k loan repayments are a deduction from your DMI in the chapter 13 means test and schedule I/J calculation of what your plan payment would be.
You could pay taxes, federal student debt or put the money into a non deductible IRA instead. Or just spend it on something you need that you would
rather not budget for in a ch13 (like new water heater, appliance, tires, tree removal, etc).

[Slingerland]

HHM/Catleg: good points. With the rental houses, I'm probably already going to be pushing a borderline area in the house valuation (the property taxes are based on boom value, but the neighborhood comps are MUCH lower.)