401k loan after DC, but before case is closed?

[Azuieldrago]

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@twono wrote:
The assets in question are motorized vehicles. They literally depreciate by the day, just like most vehicles unless they are vintage collector cars.

It would make zero sense for a trustee to ‘hold’ onto a vehicle for years in hopes that they would ‘appreciate’ in value. That defies all common sense imo. But who knows.  Years Im guessing is for Homes and things that hold value. Im guessing weeks to a few months for vehicles since mileage is no longer climbing. Granted, Thats only what I've been told and read. Never seen it. So speculation. 

The question of my thread was simply about the actual taking out a 401k loan when your case has been dc’d but not closed and whether it was frowned upon by the trustee or if it would create an opportunity for the trustee to seize my bank acct where that 401k loan check was deposited in.
Isn't that something your lawyer can answer? Mine just told be any large payments I got I would have to report and was confirmed by my trustee at my meeting. Up to 6 months. Except my tax returns were safe.

My concerns werent ‘should i take a 401k loan. That decision was made 6 wks ago.

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Not trying to dog on ya. Just trying to see your side of things. Never know what I can learn.

[twono]

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@Azuieldrago wrote:

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@twono wrote:
The assets in question are motorized vehicles. They literally depreciate by the day, just like most vehicles unless they are vintage collector cars.

It would make zero sense for a trustee to ‘hold’ onto a vehicle for years in hopes that they would ‘appreciate’ in value. That defies all common sense imo. But who knows.  Years Im guessing is for Homes and things that hold value. Im guessing weeks to a few months for vehicles since mileage is no longer climbing. Granted, Thats only what I've been told and read. Never seen it. So speculation. 

The question of my thread was simply about the actual taking out a 401k loan when your case has been dc’d but not closed and whether it was frowned upon by the trustee or if it would create an opportunity for the trustee to seize my bank acct where that 401k loan check was deposited in.
Isn't that something your lawyer can answer? Mine just told be any large payments I got I would have to report and was confirmed by my trustee at my meeting. Up to 6 months. Except my tax returns were safe.

My concerns werent ‘should i take a 401k loan. That decision was made 6 wks ago.

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Not trying to dog on ya. Just trying to see your side of things. Never know what I can learn.

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My attny did answer that question, but it was after i posted this thread.  

Since a 401k loan is not taxable, it's not income.  Any type of loan isn't income.

The trustee flatout asked me at the 341 meeting if i wanted to buy any assets back.  He snickered and said , 'I don't have any room for this stuff, are you sure?'.

I already bought 3 titled assets back from the trustee.  The other assets were going to the trustee.  Well, 2 of them.  Another asset was agreed upon that i was buying back for $6k.  But now i'm buying all 3 of the remaining vehicles back.   What matters to the trustee is what you owned, what money was in the bank, etc, on the DAY of filing.  Anything after that doesn't matter, according to my attny.

People may get a huge promotion a month after DC and go from a $100k a year, to $500k....Does that mean the trustee has any rights to that new, higher income?  Short answer, no.  I had to show balances of checking accts on the day i filed....I asked attorney after the 341 if i can start saving money and keeping it in the bank and not worry about receipts and records, etc....he said i can do whatever i want with whatever moneys i get.

Just an FYI, my attorney is also a trustee.  There's another fun fact about my attorney but that would lead to the google experts then his name would probably be revealed.  lol.  Let's just say that he's a 'big deal' so to speak in the county/big city of which he represents in a government position kinda way.

His services also cost me close to $4000 for a Ch. 7, for what it's worth.

[Azuieldrago]

Its wasn't taxed as it being income, it was taxed because it was a pre-401k. So when I used the money, I was taxed on what was taken out. It was a yr long loan so it went through a tax filing season. Maybe thats why I had to pay tax on it, or maybe I filed wrong. I dunno. That was just my experience. My filing was $2k. Our city is only about 60k for population and our sister city in the next state is about 80k, in which my lawyer is licensed in to. So maybe he is just lumping them together in terms of what a trustee will/can do. I am merely passing on info I was told by him. If I were to get a promotion like that, pre-discharge, the trustee would want to convert to a 13. Only raises I am looking at is nothing more than a $1 an hr extra. Atty wasn't concerned about that. I even got my raise after I filed. Didn't change my means test. Maybe my atty likes to play it safe as a just in case since Trustees can be finiky.

[twono]

All i know is when i left my employer, i rolled my employer based 401k into a rollover ira. When i cashed out $140,000, i had to pay state/federal tax and a 10% early withdrawal penalty.

The 4 times that i took out a 401k loan while employed with said employer, there was no tax, no additional irs filings or schedules because of the loan.

The loan payment was simply taken out in wkly payment.

For instance, a $25,000 loan for 60 monthrs = $110 wk. i have to work 2 hours a week to pay for that loan which is essentially putting each loan payment back into my own pocket

A 401k loan is really no different than any other personal loan from a bank.

[Azuieldrago]

If thats the case. Maybe I did it wrong. When it comes to taxes and the IRS, Id rather over pay than risk being on their bad side. My fault. But, no mad IRS for me. Lol

[twono]

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@Azuieldrago wrote:
If thats the case. Maybe I did it wrong. When it comes to taxes and the IRS, Id rather over pay than risk being on their bad side. My fault. But, no mad IRS for me. Lol

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Not sure how you might have 'did it wrong' though and paid taxes on your 401k loan.  401k loan by its' own definition is non-taxable.

When i cashed out my $140,000, i did pay some of the taxes for each withdrawal, just not all of them. I needed to have as much money going to my debt as possible.  That's where all that money went, to the banks, but i still couldn't get ahead of the monster i created.

If i took $40,000 and after i paid fed/state income tax and the 10% early withdrawal, i was only getting about $26,000.  So on a few of the bigger withdrawals, i was paying about 50% of the tax rate.   You're able to dictate how much tax if any, you want to pay at the fed/state level when you withdrawal from your 401k or Rollover IRA in my case.  The 10% early withdrawal is automatic though...you pay that as soon as you hit 'submit'.

401(k) Loan Basics

Technically, 401(k) loans are not true loans because they do not involve either a lender or an evaluation of your credit history. They are more accurately described as the ability to access a portion of your own retirement plan money (usually up to $50,000 or 50% of the assets, whichever is less) on a tax-free basis. You then must repay the money you have accessed under rules designed to restore your 401(k) plan to approximately its original state as if the transaction had not occurred.

Another confusing concept in these transactions is the term "interest." Any interest charged on the outstanding loan balance is repaid by the participant into the participant's own 401(k) account, so technically this also is a transfer from one of your pockets to another, not a borrowing cost or loss. As such, the cost of a 401k loan on your retirement savings progress can be minimal, neutral, or even positive. But in most cases, it will be less than the cost of paying "real interest" on a bank or consumer loan.

[Azuieldrago]

Oh its quite simple really. Be tax dumb like me. When they ask if you have taken money against your retirement plan, say yes. Give the amount, it changes the amount owed/refund. Don't question it, and continue to file. See, easy peasy. LOL. I cannot currently take out loans against my 401K at my current work so its a non issue anyways, but thank you for that info. I work in the trucking industry as a mechanic and in the last quarter, 900 companies went under. We had to pinch our pennies due to a refinery in our city that exploded. We had a big contract with them and that ended until they can rebuild that will take 2-3 yrs. Luckily our owner is spread out so other divisions can carry the extra load for a moment and his other businesses can as well. So back to topic, if that scenerio plays out badly and I do get another job that does allow 401K loans, I am now armed with good information. Thank you.

[twono]

I read a story recently about how the trucking industry is losing a ton of trucking companies.  Not sure if i understood why though. 

I'm in the heavy highway construction business and am a CDL holder.  We should talk trucks sometime, the good/the bad.  I always tell guys on my crew that i'm gonna buy a dump truck and just sub off my current employer.  Thats about 10 yrs out though. 

Back on topic...the only downside for me taking out this 401k loan (or anybody for that matter), is not making money from the stock market on that money that you withdrew.  Unless WWIII breaks out, then i will have perhaps saved $20k.  

A loan that you can take out and pay yourself back with a lttle bit of interest = WIN WIN.  As mentioned, it's like taking money out of one pocket and putting it in the other.