401K loan and chapter 13

[jjjcmjlr]

What is the name of your state? NY
Does anyone know what NYS bankruptcy laws or policy is about 401K loan repayment during a Chapter 13 BK? Thanks in advance for your help.

 

[Ladynred]

Probably will NOT be allowed. You are essentially paying YOURSELF back and paying it would not be 'fair' to your other creditors.

 

[jjjcmjlr]

So does that mean that the taxes on the loan would be due as if the loan payback was in default? or are the payments suspended or something by the courts.

 

[david007]

is! Probably will NOT be allowed!

 

[Ladynred]

David007 - please remove the advertising from your signature - it is NOT ALLOWED here.

 

[giggle50]

Unless your plan calls for 100% payback to unsecured creditors you won't be able to pay your 401k loan while in chapter 13 bankruptcy.

 

[JoeShmoe]

Regarding 401K Joe Shmoe From Pa

What happened with me is I fought it like a dog.. Basically you can continue paying on the 401 k if continuing to pay the loan gets your creditors more money. What they do is take 100% minus the tax liability under your plan.

ex. you owe 30,000.00. Tax liability of defaulting on loan would be 5000.00
30,000.00 - 5000.00 = 25000.00

pay back 25000.00 in 36 to 60 months and they will leave the loan alone. You will not however get any plan that will leave the loan alone without that 100% payback minus the tax liability.. and your plan will be 60 months unless you can payback 100% Total in 36. Hope this helps

Joe