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Met w/ lawyer- questions

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Met w/ lawyer- questions

So we met with a lawyer last night.  He told us to go buy a car.  Outr car lease is up in May and if we don't do it now we will be car less.  My husband is legally blind and doesn't drive so we only have one car.


my questions are:  if we file chapter 13, when can you start with new credit?


we have loans against our 403b can I stop paying them?


where is the best place to get a car loan?


what should I be asking or thinking about??

Message 1 of 5
Established Member

Re: Met w/ lawyer- questions

Most likely, if you stop paying your 403b loans, the unpaid balance will be considered an early withdrawal and you will be heavily taxed. Don't stop paying until you know the ramifications.

Message 2 of 5

Re: Met w/ lawyer- questions

That is perfect advice.

Message 3 of 5

Re: Met w/ lawyer- questions

You are not likely to get any meaningful credit until you have completed your bankruptcy. The filing date of a Chapter 13 does not eliminate your debts. You have to successfully complete the case and get a discharge. That will probably be 36 - 60 months after you file. As far as your car lease is concerned, talk to the lessor and see if they are willing to convert your lease into a loan so that you will be buying the car, assuming you are happy with the car.


What else should you be asking? You can't think of everything at this stage. As another person pointed out, if you stop paying the 401k loan, you are going to owe tax on that money as income. Keeping the 401k loan gives you a very useful means test deduction, and the money you are paying for the loan is money you are paying to YOURSELF. Every loan payment goes right back into YOUR pocket, not to the creditors. If you stop the 401k loan, that extra money might go to general creditors, instead of back into your own pocket.


The most important thing is to find a good lawyer. Someone who is patient and gives you the time you need. One question that is highly important is, what chapter of bk should you file? You mentioned Chapter 13. Why not a 7?

Message 4 of 5
Established Contributor

Re: Met w/ lawyer- questions

We had a lease and because it would need to be dealt with mid-chapter 13, we traded it in and got something new but reasonable before we filed. Our attorney included the car in our payment plan and the Trustee got the interest rate lowered on it.


I also had a loan on my 401k. The monthly payment helped us in our means test and I kept paying on it. If not paying it was an option I wasn't aware of it. Becasue my loan was paid back through my paychecks I believe as long as I was getting one they were taking their payment.


Our payment plan included our new car, attorney's fees and some taxes and zero went to creditors. Our payment plan lasted 48 months. During that time my husband and I were able to get 1 credit card each through our credit union. We didn't try for any others until almost 2 years post discharge when we really needed to increase our tradelines to prepare for a mortgage.


It has been a long road. We are just 6 months from the 7-year mark and are under contract for a new construction home (already went through underwriting).  


Good luck!

Message 5 of 5
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