401k

[nicsmom805]

What is the name of your state? NY
I filed chapter 13, and have been making my payments, each month. I need money for a car repair, and for my son's graduation. I have the option to borrow from my 401K. My employer contribuates to it, not me. Will i Be allowed to do this, with the bankruptcy? Thank you.

 

[Betty]

I believe I would run this by your bankruptcy trustee.

 

[cbg]

Not all 401k plans allow for loans. The items you describe would HAVE to be handled by a loan, not a withdrawal. The IRS strictly limits the reasons for which a 401k withdrawal can be taken and neither a car repair nor a graduation would qualify.

First confirm that a loan is even a possibility, and if so to what extent and at what rate. Then, as Betty suggests, discuss it with your bankrupcy trustee.

 

[Gregeney]

Borrowing from your 401(k) would have to be approved by the Court. Check with the Ch13 Trustee first and see what their position would be for you to suspend your Plan payments enough to pay your necessities. A car repair should be allowed but possibly not graduation expenses, depending on how necessary the Trustee sees them.

 

[Betty]

The problem with borrowing from your 401k if you are allowed, is you're getting yourself another debt/loan that has to be paid back.