New member question

[IOWHO]

Hello everyone: I hope someone can help me with some of my questions.

Last June, I borrowed from my 401K to purchase the car that I had been leasing, thinking this would be the most economical thing to do. If I understand correctly, and if we file a chapter 7, my monthly payment to the 401 won't be counted as an expense and the car will have to be sold. What I need to know is could I sell the car now, return the money to the 401 then lease another car and if I were to do this, how long should I wait before filing?

Secondly, if we were to file a chapter 13 instead, since this car is paid off, would I still be forced to sell it and apply the proceeds towards the debt? I haven't seen much information on what assets can be kept in a chapter 13 and would appreciate any information regarding house, cars, appliances, electronics etc. Thanks in advance. -Sandra

[lrprn]

My answers to some of your questions are below in red....

Last June, I borrowed from my 401K to purchase the car that I had been leasing, thinking this would be the most economical thing to do. If I understand correctly, and if we file a chapter 7, my monthly payment to the 401 won't be counted as an expense and the car will have to be sold. What I need to know is could I sell the car now, return the money to the 401 then lease another car and if I were to do this, how long should I wait before filing? Secondly, if we were to file a chapter 13 instead, since this car is paid off, would I still be forced to sell it and apply the proceeds towards the debt?

If you did this in June 2006, then there's a new case just decided that states the withdrawal from your 401K counts as income and will be added to your income total for the previous six months before filing. You need to have at least six months betwen the withdrawal and filing Ch 7 or Ch 13 to ensure the trustee can't go after the money (even though you used it to buy a car). If you sell the car, same thing - need to wait six months to file for the same reason.

If you file Ch 7, is this the only car you have? If it's not, the trustee may go after it or he/she may not...depends on your individual circumstance. If you file Ch 13, then you can keep the car and make payments on it through your plan. Best thing to do in a more complex situation like this is to arrange for 3-4 free consultations with bk lawyers in your area and put all your questions on the table. If you have to go Ch 13, then you definitely want to use a lawyer for sure anyway.

I haven't seen much information on what assets can be kept in a chapter 13 and would appreciate any information regarding house, cars, appliances, electronics etc. Thanks in advance. -Sandra

The exemptions you are allowed when filing Ch 13 are set by the state you file in. What state are you planning to file in?