Las Vegas Gambling Town
I received a question from a former ?Chapter 7?bankruptcy client ?who had received a?discharge last year. ?His case was completed and closed, and he had been able to get a fresh start free from overwhelming debts.
He wanted to know if he could take a loan from his 401k retirement which he had?exempted?in his bankruptcy case.
?
?
I hear this question a lot, in different forms. ?Can I buy a house? ?Am I allowed to get a credit card? ?What about student loans? ?I was thinking about getting a new car ?.
When my clients say ?Susanne, what do you think?? ?I answer that it is their choice, and they are the ones who must make the decision.
That said, my personal opinion is that it is normally not a good idea to take a 401k loan or to use retirement funds.
- Borrowing from a?retirement?account is the ultimate act of borrowing from your future to pay for your past or present debts.
Debtors in bankruptcy?should not sell or transfer any property while their case is open, without court permission. ??However once his bankruptcy case was closed, he received his Discharge, and the Final Decree was entered, all of the property he listed and exempted was within his control again. ?He was free to do as he saw fit.
Prior to taking a loan that may add to his financial problems, I recommended that he get more advice. ? If his problem were debts again, then he might need to come back and ?get legal advice from me.
I have practiced bankruptcy law in North Carolina for over 25 years. ?It is my job to try to come up with the best solution. ?As a lawyer I am able to review any legal defenses, go over laws and consequences, and explain legal options such as?filing another bankruptcy.
I can also recommend ?non-bankruptcy alternatives, settlement, or workouts if they appeared to be good options to?avoid filing bankruptcy. ??The goal is to see if there was something to help get control of the debts rather than borrow and make the problems worse.
- Another risk from a 401k loan is that there can be tax consequences if the loan isn?t paid back and?many 401k plans require repayment in full if you leave your job.
If not paid back, then the amount can be turned into the IRS for income taxes and withdrawal penalties. ?
Some people find themselves stuck in a job to avoid the tax consequences from leaving. ?Others find themselves in tax trouble when they are laid off ? a really awful time to face a big tax payment if you can?t repay the loan in full. ? Check the terms of your 401k plan for more details or speak to your tax?adviser.
If my client was thinking of taking a loan against his retirement, that meant his budget hadn?t ?stabilized. ?Something wasn?t working. ?With a stable budget, he should have been able to have a short term savings fund to cover things that don?t come up every month like home or car repairs, ?medical issues, and purchases so he didn?t have to finance them.
In general, filing for bankruptcy might be a better option then using precious retirement funds that creditors don?t have access to unless you give it to them. Even though my client had filed before, he might be eligible to file again. ?If not Chapter 7, then maybe a???Chapter 13.
Taking a loan is not the right thing to do if it leaves you without enough monthly income to pay for ongoing expenses while you repay the loan. ? You shouldn?t do it to pay off debts like credit cards that might be dealt with some other way.
I realize that sometimes someone needs money now and there isn?t any other choice. ? It is a bad choice to have to make.
Elizabeth Warren warns this is an economy built on borrowing against the future, leaving too many American families just one pink slip or medical crisis away from running out of financial fuel.
Borrowing is usually not the answer.
Source: http://www.bankruptcylawnetwork.com/after-chapter-7-bankruptcy-discharge-can-you-take-a-401k-loan/
james jones aladdin black forest ufc 144 fight card ufc 144 results acura nsx all star weekend 2012
No comments:
Post a Comment