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Borrowed from 401k to buy used truck

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8ayou8illy

Junior Member
What is the name of your state (only U.S. law)? Louisiana
I borrowed to buy a used truck but I was told if I registered it in my name it would not be wise. I plan to buy the truck for 5,500 and put it in an immediate family members name. Will the trustee find out? The 401k is not considered a loan since I pay it back to myself without penalties. Again, the truck isn't in my name. Only insurance will be in my name.
Hate to be sneaky but I have to get to work and my old car is needing repairs worth more than its worth. Just seems like a great deal on a dependable truck that'll keep me working and paying on the bankruptcy. Win win for all parties
 


cbg

I'm a Northern Girl
Just because you pay it back without penalties doesn't mean it isn't considered a loan. It is a loan.
 

FlyingRon

Senior Member
Most 401k plans don't give a hoot what you are going to do with the money (some however do, often limiting it to the same list of conditions for hardship withdrawals).
Note that 401k loans are dangerous in that they are spring loaded to be do if you leave the company, etc...

I'm confused as to what you're trying to do by not titling it in your name? That sounds like you're getting into another can of worms.
 

commentator

Senior Member
I gather that you are in bankruptcy right now. You want to get money out of your 401K and use it to buy a truck, and someone has told you that you would be "wise" (because of the bankruptcy, I assume) not to title the truck in your name, though you bought it and you're the one who is going to be using it. So you are thinking of buying the truck and having it put in someone else's name. Let someone here who is familiar with the ins and outs of bankruptcy take a look at this and tell you how wise it is. Give a few more details about your bankruptcy situation.
 

adjusterjack

Senior Member
I borrowed to buy a used truck but I was told if I registered it in my name it would not be wise.
Stop taking legal advice from idiots.

I plan to buy the truck for 5,500 and put it in an immediate family members name.
Two reasons for that being an incredibly bad idea.

1 - It's bankruptcy fraud.

2 - That family member will OWN the truck. You understand that, don't you? You may have a hard time getting it back.

Will the trustee find out?
Yes.

Trustees are smart and look for fraud under every rock.

Hate to be sneaky but I have to get to work and my old car is needing repairs worth more than its worth. Just seems like a great deal on a dependable truck that'll keep me working and paying on the bankruptcy. Win win for all parties
Win win?

You mean lose lose, as soon as your bankruptcy is dismissed for fraud and your creditors come down on you with both feet.

By the way, you don't have to be sneaky about this.

Louisiana's bankruptcy exemption for a vehicle is $7500 for one vehicle per household per RS 13:3881(A)(7):

http://law.justia.com/codes/louisiana/2015/code-revisedstatutes/title-13/rs-13-3881/

So take your loan, buy your truck, sell your car and you'll be good to go.
 
OP has not given enough info however, it appears he/she is currently in a Chapter 13. I say this based upon his/her comment “keep me working and paying on the bankruptcy”. Assuming I am correct and the Chapter 13 Plan has not been confirmed, taking out a 401k loan will have to be reported and will require the debtor (OP) to file an Amended Schedule I and J (budget). It may even need a Court Order blessing the transaction, depending upon local procedure.

There is nothing wrong with purchasing a reliable vehicle during the course of a Chapter 13. Nor is there anything wrong with using exempt assets (funds in a retirement account) for that purpose during the course of the Chapter 13. Likewise, there is nothing wrong with putting the vehicle in the true owner’s name during the course of the Chapter 13. The problem is the loan. With the new loan payment (payroll deducted), OP will have to prove he/she an still afford the Plan payment.

So, OP, to go any further with this we need to know:

1. Have you already filed bk?

2. If you have already filed, what chapter bk did you file?

3. If you filed a Chapter 13 has your Chapter 13 Plan been confirmed (approved) by the judge?

Des.
 

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