Took a 401k Loan before filing Chp 7

[marie1981]

Hello,

I'm interested in filing Chapter 7 bankruptcy on about 45,000 of unsecured debt. I am current on all of my bills and mortgage/ car payments, but have been juggling to pay them all.  I have already met with an attorney for a consultation and he stated I am under the income requirements for the Chapter 7 in Texas.

My concern is that I took out a 401K Loan in February of this year for $6,000 to try and pay off bills. I am making the payments through automatic payroll deductions, also I’m not allowed to not contribute to my 401K (1% contribution). I work for a very big bank.

My question is, does this $6,000 deposit count towards my income since it was in the last 6 months? I would think it does and might make me closer to the limit and I would have to do the means test. Also what about Financial Aid payments from Pell grants, do those count as income well? I received $1,100 in January this year.

Thanks for any help you can provide.

[Anonymous]

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@marie1981 wrote:

Hello,

I'm interested in filing Chapter 7 bankruptcy on about 45,000 of unsecured debt. I am current on all of my bills and mortgage/ car payments, but have been juggling to pay them all.  I have already met with an attorney for a consultation and he stated I am under the income requirements for the Chapter 7 in Texas.

My concern is that I took out a 401K Loan in February of this year for $6,000 to try and pay off bills. I am making the payments through automatic payroll deductions, also I’m not allowed to not contribute to my 401K (1% contribution). I work for a very big bank.

My question is, does this $6,000 deposit count towards my income since it was in the last 6 months? I would think it does and might make me closer to the limit and I would have to do the means test. Also what about Financial Aid payments from Pell grants, do those count as income well? I received $1,100 in January this year.

Thanks for any help you can provide.

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The loan is not income because you are expected to pay it back; had you taken a distribution that would be another story.  Pell grants on the other hand are regular taxable income.

Good Luck!

[marie1981]

Thanks for your insight!

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@Anonymous wrote:

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@marie1981 wrote:

Hello,

I'm interested in filing Chapter 7 bankruptcy on about 45,000 of unsecured debt. I am current on all of my bills and mortgage/ car payments, but have been juggling to pay them all.  I have already met with an attorney for a consultation and he stated I am under the income requirements for the Chapter 7 in Texas.

My concern is that I took out a 401K Loan in February of this year for $6,000 to try and pay off bills. I am making the payments through automatic payroll deductions, also I’m not allowed to not contribute to my 401K (1% contribution). I work for a very big bank.

My question is, does this $6,000 deposit count towards my income since it was in the last 6 months? I would think it does and might make me closer to the limit and I would have to do the means test. Also what about Financial Aid payments from Pell grants, do those count as income well? I received $1,100 in January this year.

Thanks for any help you can provide.

---

The loan is not income because you are expected to pay it back; had you taken a distribution that would be another story.  Pell grants on the other hand are regular taxable income.

Good Luck!

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[Anonymous]

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@marie1981 wrote:

Hello,

I'm interested in filing Chapter 7 bankruptcy on about 45,000 of unsecured debt. I am current on all of my bills and mortgage/ car payments, but have been juggling to pay them all.  I have already met with an attorney for a consultation and he stated I am under the income requirements for the Chapter 7 in Texas.

My concern is that I took out a 401K Loan in February of this year for $6,000 to try and pay off bills. I am making the payments through automatic payroll deductions, also I’m not allowed to not contribute to my 401K (1% contribution). I work for a very big bank.

My question is, does this $6,000 deposit count towards my income since it was in the last 6 months? I would think it does and might make me closer to the limit and I would have to do the means test. Also what about Financial Aid payments from Pell grants, do those count as income well? I received $1,100 in January this year.

Thanks for any help you can provide.

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Why not?

[marie1981]

When I first got hired I had 31 days to opt out of retirement savings and I never did. That was 15 years ago. Now if i try to remove it, I dont have the option, the only option is minimum 1%. It's prob user error, I need to call HR and see how. 😊

[srloring13]

Some 401K plans do not allow contributions if there is an outstanding 401K loan.  That could be the reason marie1981 is not allowed to contribute.

[Anonymous]

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@srloring13 wrote:

Some 401K plans do not allow contributions if there is an outstanding 401K loan.  That could be the reason marie1981 is not allowed to contribute.

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That would suck.  Hell the amount I contribute any small amount I owe, I could pay back the loan in a couple of months if that were the case.

[Anonymous]

At some (I don't know about all)  filing for bk is automatic termination.   The first Mrs, Backwoods was a Manager for Big Bank  and fired some one for this. This may have changed as the first Mrs. Bankwoods and I have not spoken in over 20 years.  The bank said  they were a risk.  Be careful 

[Anonymous]

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@Anonymous wrote:

At some (I don't know about all)  filing for bk is automatic termination.   The first Mrs, Backwoods was a Manager for Big Bank  and fired some one for this. This may have changed as the first Mrs. Bankwoods and I have not spoken in over 20 years.  The bank said  they were a risk.  Be careful 

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This is generally the case when one works for any job that is financial and handles sensitive information e.g. customers SSN access etc.  I thought I might not get an offer once for a job because of my BK13 and the company I had applied for (which handled retirement funds/plans). 

[marie1981]

So does this law below not apply? I work for a large bank but I don't do anything with customers or their information. I work in computer systems.

Section 525 of the Bankruptcy Code (11 U.S.C. 525) states:

(b) No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt--

(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;
(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or
(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.