401K Exempt???

[John Scott]

What is the name of your state? Colorado

Due to health problems and paycuts (I work for an airline) we have about 40k in cc debt. We already lost the house in foreclosure(when we lived in Indiana), but were hoping to avoid a BK as well. Anyhow we have about 20k in 401k's. If we go Ch 13 will we have to liquidate the 401k?? Or is there some kind of exemption? We get hammered on taxes if we touch the money.
Thanks

 

[spoiler]

You can keep your 401K. It is exempt. Just curious...why are you fighting filing?

 

[JoeShmoe]

From Pa

401 K's are exempt However 401 K loan payments are not. If you have a Loan they will want you to quit paying and put that money towards your plan. It's considered disposable income.

However you can pay a 401 k back if you opt for a 36 to 60 month plan @ 100% minus the taxes you would owe not paying the loan would cause.

ex. you owe 40,000, if you don't pay back the loan then you have a taxible distribution.. Let's say the Penalty and taxes come to 3000.00 Then you can continue to Pay the loan if you Pay back 37000.00 If you can pay that back fine.

Also you can't contribute to a 401 while in bankruptcy as those payments are considered disposable income. Hope this helps, Joe

 

[John Scott]

RE: Why am I fighting filing

Many reasons, Pride, wishful thinking, etc.... Seriously though, If I can avoid a Chap 13 I'd like to. I've found a foreclosure on the credit rpt is bad, but if you keep current with other bills it takes the edge off. If my employer ever gets out of Chapter 11, I hope to be in a position to buy a house again.
I'm also still gathering information so I don't mess up again.

FYI
JS

 

[bigun]

If you've no secured creditors, you want to file a chapter 7 and wipe 'em out 100%.