401K Withdraw

[CindyLou]

Keep in mind that your 401K is only protected if it remains a 401K. If you cash out within 6 months of discharge it could become non-exempt. But this is only if the trustee finds out. I say do what you have to do, but only if its the last resort. I agree with previous posts that suggest doing a BK for your wife. Even if its a 13! Isn't the goal a fresh start? Good luck.

[possumfat]

minny, the preferential payment the trustee is after was made on spouses credit card............if he got some of it wouldn't they come back to her for the amount the trustee got ?

[NASCAR20FAN]

You do repay yourself a certain %'age of interest on the loan, but the gain isn't as much as you could get with the money remaining invested in the 401K.

Possum,.........

JMHO here, but I would not tap the 401K to pay off a CC.

What if you have a medical emergency or need a major repair done ASAP on your home, or, or, or,....... Where you might need access to those funds for something bigger than paying off a CC??

You gotta keep in mind major rainy days where you might really need that safety net. Not to mention your "Golden Years" when Soc Sec might only pay out at 75% or less of what's currently predicted.

It depends on the plan... All that I have put into give you 0% [interest] back. I 100% agree with you to pay off CC not a good idea. Like I said in my OP the best thing to do is to just reduce the amount going in and pay off those bills post tax...

[Minnymouth]

Since you are discharged but not closed....... the battle is between the Trustee and the creditor that you made preferencial payment too....... The Trustee will take the creditor to court to get the money.....

DO NOT 'ROCK THE BOAT"........... you have been discharged, the problem now belongs to the Trustee......

DO NOT USE YOUR 401K to withdraw money to pay a creditor off that has been discharged......... or previously paid in full by you.............

BE PATIENT................ all you need to do is wait for your closing......

BASICALLY YOUR BANKRUPTCY IS OVER................... IF YOU ARE DISCHARGED..........

Do not get into the battle between the creditor and the Trustee........!!!!!!

[SinkingFast]

I would not advise a 401k loan... a loan on a 401k only means you get cash upfront, and the interest is not credited to your 401k. It is pointless.

You do repay yourself a certain %'age of interest on the loan, but the gain isn't as much as you could get with the money remaining invested in the 401K.

Possum,.........

JMHO here, but I would not tap the 401K to pay off a CC.

What if you have a medical emergency or need a major repair done ASAP on your home, or, or, or,....... Where you might need access to those funds for something bigger than paying off a CC??

You gotta keep in mind major rainy days where you might really need that safety net. Not to mention your "Golden Years" when Soc Sec might only pay out at 75% or less of what's currently predicted.

[NASCAR20FAN]

Can you wife file BK as well? A 401k loan is another option, but if she would qualify for a chapter 7, I wouldn't do the 401k loan.

I would not advise a 401k loan... a loan on a 401k only means you get cash upfront, and the interest is not credited to your 401k. It is pointless.

[aa06a47]

credit card debt belongs to wife.............like the idea of borrowing agaisn't the 401K instead of a withdrawal.

Can you wife file BK as well? A 401k loan is another option, but if she would qualify for a chapter 7, I wouldn't do the 401k loan.

[possumfat]

credit card debt belongs to wife.............like the idea of borrowing agaisn't the 401K instead of a withdrawal.

[NASCAR20FAN]

I'd leave the 401k alone. My suggestion lower the amount you are putting in to 1% so you'll have a little more money to pay down bills. It will not be a whole lot extra since those deductions are pre-tax, but if you keep going on your 401k with the 1% and just bite the bullet and pay the bills down you'll be better off in the long run. Trust me...

[aa06a47]

Sorry Possum. I didn't realize you'd already filed and been discharged.

You are well past the 6 months from date of filing for the "Windfalls" rule to apply. Even tho cashing out your own 401K wouldn't really be a windfall per se.

The one thing to be worried about is the Trustee possibly reopening your BK under the pretense of some sort of fraud. Not that you committed fraud. But that the Trustee might feel "If you can cash out your 401K now to pay a Creditor, why didn't you do so before you filed BK?" line of thinking. But I don't even see how that would apply.

Yeah, now I'm confused (my nature), why are you paying on a credit card if it was discharged in BK?

[cherir]

What credit card are you wanting to pay off? Is this something that was not included in your bk? If you are discharged, isn't it also discharged?

I'm sorry I'm confused. Have you run up additional debt since discharge?

I would definitely look into getting a loan against my 401K rather than liquidating part of it. Not all companies offer it, but worth checking out.

I personally would not be caught paying off any debt that close to a bankruptcy. If it causes scrutiny on your case, I can't imagine that would be good. From everything I have read, trustees can continue to monitor your case for many months afterwards.

[CATCHMEIFYOUCAN]

401k

While we are on this topic of withdrawals from a retirement plan, I borrowed against my 403(b), optional, but this a priority unsecured debt that would be paid outside of my plan. Can one borrow against a 401? Better to borrow your own money, if possible.

I thinks its better to borrow, take out what they call a "general purpose," loan if you have the funds. For Example, I borrowed $12,000 a couple years ago to pay off my car loan I had with a credit union, now I'm paying myself back through payroll deduction which goes automatically into the 401k loan with interest (and its not taxed). Now if you take out a withdrawal from your 401k loan, than your slammed with all these penalties at the time and having to pay taxes at the end of the year. The choice is yours!

Best Wishes, Catchmeifyoucan

[treehugger1]

While we are on this topic of withdrawals from a retirement plan, I borrowed against my 403(b), optional, but this a priority unsecured debt that would be paid outside of my plan. Can one borrow against a 401? Better to borrow your own money, if possible.

[SinkingFast]

what is CMI and the 6 month rule ?? Also I file over a year ago (Oct. 5th, 2005) and was discharged on January 17th, 2006.

Sorry Possum. I didn't realize you'd already filed and been discharged.

You are well past the 6 months from date of filing for the "Windfalls" rule to apply. Even tho cashing out your own 401K wouldn't really be a windfall per se.

The one thing to be worried about is the Trustee possibly reopening your BK under the pretense of some sort of fraud. Not that you committed fraud. But that the Trustee might feel "If you can cash out your 401K now to pay a Creditor, why didn't you do so before you filed BK?" line of thinking. But I don't even see how that would apply.

[aa06a47]

what is CMI and the 6 month rule ?? Also I file over a year ago (Oct. 5th, 2005) and was discharged on January 17th, 2006.

CMI is current monthly income. The amount is used in the 6 month average to determine if your in a chapter 7 or chapter 13. 6 months is the look back period on income. I believe this is what SF is referring to as the 6 month rule.