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    Discharge or close

    Hello, I just made the last payment on my chapter 13 and it was posted and funds disbursed on 5/31. I really need to buy a car and I have been waiting patiently but my car is on its last leg. I plan on getting a loan from my 401k but not sure if I can do it when the bankruptcy shows as discharged or closed. Is there a long wait usually between discharged and closed?

    #2
    You can borrow from your 401(K) even if your bankruptcy is open. As for discharge and closed timeframes, mine discharged a month(ish) after my last payment was posted and closed about three months later. In your shoes I might consider borrowing from the 401(K), wait maybe six months, join a credit union, and refinance the car with them so you can pay back the money you took out of your retirement. The main benefit here, other than your fund being made whole again is a car payment to a credit union will be reported to the credit bureaus and will help your credit score.
    Latent car nut.

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      #3
      Ahhh good advice Shipo! I have been a credit union member for awhile so hopefully that will help. My car has 289,000 miles on it no AC and it is burning oil the power steering keeps leaking fluid and I just can’t put anymore money into it.I have been trying to be patient. I called my attorney a couple of weeks ago before my last payment and he said I couldn’t take a loan from my 401k until the bankruptcy was discharged. He said it would extend the bankruptcy because I would have to request permission from the court. I can’t wait another few months for a car.

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        #4
        Carlybean, in our case, after consulting with our attorney in Dec. 2021, we took out a substantial 401K loan to cover what we thought would be updates to the house we were preparing to sell. We were approx. two months from our final payment and the lawyer said it was fine.
        To make a very long story shorter, we were discharged in early February 2022, after making our 60th payment about three weeks early (following @shipo's advice) and proceeded to use some of the money for a secured CC and moving expenses related to our relocation as my husband had received an out of state job offer complete with a relo package in the interim.
        We decided to sell the house to an investor instead of painting, replacing carpeting, etc., as the loan just wasn't going to be enough to cover all the repairs and updates the 1975 house needed to be sold on the open market at a competitive price.
        It was the easiest , least stress free way to move and get out from under a financial burden.
        After arriving in Washington last week and receiving a wire transfer of the home proceeds in our bank account, we paid off all existing 401K loans (2), so we owe nobody nothing LOL!
        Our case closed the day the moving truck unloaded our many belongings - how's that for irony?
        My advise is to take out the loan if you're allowed, but make sure you can afford the monthly repayments. Best of luck whatever you decide!
        As for your auto woes, I understand fully - our two cars just arrived last night on the transport and it's pretty clear that both need to be replaced ASAP. So we are seriously considering a cash purchase of one SUV and maybe financing the second sedan.
        Last edited by Barbisi; 06-02-2022, 09:44 AM.

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          #5
          Thank You for the sound advice Barbisi 😊 I am really tempted to start the 401k process but I am so close and don’t want to screw it up. I am almost considering renting a car for a bit but I know it will be costly. I am so happy for you and your hubby and how everything is working out for you. I know it was a tough 5 years but you are doing amazing! Especially not owing anyone has to be a wonderful feeling 😊 and your hubby getting a new job and a new start for both of you. Congratulations 😁

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            #6
            Ok back again with a question but first…I have been coming to this site for almost 5 years now and I have to say that you guys have been amazing. Answered so many questions I had when I was worrying myself for nothing and for what you just broke and shipo (and others)do for others is wonderful. This is a tough path to navigate and your guidance has been priceless. So I want to say Thank You so very much! 😊

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              #7
              Now for my question… Barbisi and Shipo thank you for the advice you gave 😊 like I said I am tempted to request my 401k loan for a car but I feel like I would be playing with fire. My car is not going to last much longer so I am trying to think of alternative ways to coast along until I get the discharge. I use my car for work so I travel quite a bit.Do I rent a car? If I were to repair my car it was quoted over $2500 and I just can’t put that kind of money into it..maybe if I had my 401k 😩 I called my attorney today to plead my case and explain how dire the situation is. I feel like My car is going to break down while I am working. My attorney said that even though I made my last payment on 5/20 (disbursed 5/31) they have not received anything from the trustee yet and when I do finally fill out the paperwork it is probably going to be another 45 to 60 days before I get the discharge. She said we can go back to court to request permission to obtain a car loan or else I can spend up to $5000.00 to buy a car without the trustee permission. With the price of cars now especially used where would I find a car for less than $5000.00 ???? I spoke with a gentleman at a car dealership and he said that in the last 6 months of the chapter 13 they are not worried about me using my 401k or applying for a car loan. I asked him about proof of discharge and he said the dealership doesn’t need it…they can look everything up on Pacer. I don’t feel comfortable purchasing/financing a car without my official discharge but I need to figure out something before I am stranded. Any advice? One more thing if I didn’t mention it in this long winded post..my attorney said under no circumstances am I to use my 401k without officially receiving my discharge ☹️

              Comment


                #8
                I am sorry to hear about the car problems. If you have read my posts you know that sharing one car has been more stressful on my marriage than the whole darn BK confinement period.

                I had to rent a car when my car was totaled and it's very expensive to rent even a "cheap" car. You could easily spend $2,500 in a fairly short period. I would also hate to put $2,500 into a car that isn't going to last. If going to court to buy a new car is like the process was for me it will take a decent amount of time to get the ok. At least my experience is go to the dealership and get approved for a car, similar to the one would you want to buy. Then give that info, amount of down payment, amount of loan/monthly payment and other info they might want and then it goes to court/trustee, and there is a fee for your attorney to do this. Then you wait a fairly short while for it to be approved so you get the hot document in your hand that allows you go back to the dealership and find a car in that price range you were approved to have.

                If there's any way to hold out until you are discharged I would recommend that. If you travel a lot a service like Uber probably would not work.

                Maybe look into rentals to get an idea of what the cost is and then keep driving your car on a prayer that it will last until the discharge. If it does not last then put your money on the rental.

                Or maybe put the feelers out and see if you get lucky with a car that might be in that $5,000 range from a private person vs dealership.
                I am not an expert. I just share my experiences in the Wonderful Wacky World of Chapter 13! Filed 3-30-18 Confirmed 7-11-18 Discharged 6-8-22

                Comment


                  #9
                  Thank You Carmella 😊 from what you describe that is quite the process! I think you are right though…I am going to prepare myself by looking for rentals just in case. 45 to 60 days is quite a long time.

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