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401K loan repayments and Means Test
Ninth Circuit in Egebjerg explicitly addresses the impact of tax
consequences:
"This deemed distribution will have tax consequences to Egebjerg, but it
does not create a debtorcreditor relationship. In re Smith, 388 B.R. at 888
('Nonpayment comes with liability for income taxes and penalties, but
nonpayment is a valid, lawful alternative.').
. . .
"As succinctly explained by one district court: Retirement plan loans are
qualitatively different than secured debts such as home mortgages and car
loans.
"The retirement plan administrator does not loan the plan participant the
administrator's money. It simply deducts the requested loan amount from the
partici pant's own account, and credits the loan payments and interest back
to the participant's account. If the participant defaults on the loan, the
plan administra tor deducts the amount owed from the vested account balance,
and repays the loan with this deduction. The participant must treat this
deduction as a distribution which is taxable as income to the participant in
the default year. The participant may also be subject to an early withdrawal
penalty. But, the plan administrator has no right to payment under the
Bankruptcy Code."
Read more: http://vlex.com/vid/egebjerg-v-anderson ... z1MBmHuEhE
On Thu, May 12, 2011 at 5:15 PM, Law Offices of Jonathan Leventhal wrote:
>
>
> They could possibly apply some tax consequences for not repaying the loans
> back.
>
> Jonathan Leventhal
> Attorney at Law
> 818-347-5800
>
> On May 12, 2011, at 5:04 PM, "P L" wrote:
>
>
>
> No, see Egebjerg 9th Cir 2009.
>
>
> Peter M. Lively, JD, MBA
>
> *The Personal Financial Law Center * *Culver City & Costa Mesa *
> 800-307-DEBT
>
>
>
> ------------------------------
> *From:* Alik Segal
> *To:* bootcamp-attorneys ; bk bk@nacba.org>; CDCBAA Listserv
> *Sent:* Thu, May 12, 2011 4:54:58 PM
> *Subject:* [cdcbaa] 401K loan repayments and Means Test
>
>
>
> 401(k) contributions can be deducted from income for purposes of the Means
> Test, if the contribution is involuntary.
>
> For this client, the contribution is not involuntary, so the contribution
> is not deductible from income for purposes of the Means Test.
>
> But here's a twist. Debtor has taken loans from the 401(k) plan and is now
> repaying. The repayments are involuntary, so should they be deductible from
> income for purposes of the Means Test?
>
>
>
> --
> Alik Segal
> Alik.Segal@gmail.com
> 310-362-6157
> Cal. CD, Los Angeles
>
>
>
Alik Segal
Alik.Segal@gmail.com
310-362-6157
Cal. CD, Los Angeles
Ninth Circuit in Egebjerg explicitly addresses the impact of tax consequences:"This deemed distribution will have tax consequences to Egebjerg, but it
does not create a debtorcreditor relationship. In re Smith, 388 B.R. at
888 ('Nonpayment comes with liability for income taxes and penalties,but nonpayment is a valid, lawful alternative.').. . .
"As succinctly explained by one district court: Retirement plan loans
are qualitatively different than secured debts such as home
mortgages and car loans. "The retirement plan administrator does
not loan the plan participant the administrator's money. It simply deducts the requested loan amount from the partici pant's own
account, and credits the loan payments and interest back to the
participant's account. If the participant defaults on the loan, theplan administra tor deducts the amount owed from the vested account balance, and repays the loan with this deduction. The
participant must treat this deduction as a distribution which is
taxable as income to the participant in the default year. The
participant may also be subject to an early withdrawal penalty. But,
the plan administrator has no right to payment under the
Bankruptcy Code."Read more:
The post was migrated from Yahoo.
No, see Egebjerg 9th Cir 2009.
Peter M. Lively, JD, MBA
The Personal Financial Law Center* Culver City & Costa Mesa * 800-307-DEBT
________________________________
To: bootcamp-attorneys ; bk ;
CDCBAA Listserv
Sent: Thu, May 12, 2011 4:54:58 PM
Subject: [cdcbaa] 401K loan repayments and Means Test
401(k) contributions can be deducted from income for purposes of the Means Test,
if the contribution is involuntary.
For this client, the contribution is not involuntary, so the contribution is not
deductible from income for purposes of the Means Test.
But here's a twist. Debtor has taken loans from the 401(k) plan and is now
repaying. The repayments are involuntary, so should they be deductible from
income for purposes of the Means Test?
Alik Segal
Alik.Segal@gmail.com
310-362-6157
Cal. CD, Los Angeles
No, see Egebjerg 9th Cir 2009.
Peter M. Lively, JD, MBA
The Personal Financial Law Center * Culver City & Costa Mesa * 800-307-DEBT
From: Alik Segal <listserv.inbox@gmail.com>To: bootcamp-attorneys <bootcamp-attorneys@googlegroups.com>; bk <bk@nacba.org>; CDCBAA Listserv <cdcbaa@yahoogroups.com>Sent: Thu, May 12, 2011 4:54:58 PMSubject: [cdcbaa] 401K loan repayments and Means Test
401(k) contributions can be deducted from income for purposes of the Means Test, if the contribution is involuntary.
For this client, the contribution is not involuntary, so the contribution is not deductible from income for purposes of the Means Test.
But here's a twist. Debtor has taken loans from the 401(k) plan and is now repaying. The repayments are involuntary, so should they be deductible from income for purposes of the Means Test?
-- Alik SegalAlik.Segal@gmail.com310-362-6157Cal. CD, Los Angeles
The post was migrated from Yahoo.
401(k) contributions can be deducted from income for purposes of the Means
Test, if the contribution is involuntary.
For this client, the contribution is not involuntary, so the contribution is
not deductible from income for purposes of the Means Test.
But here's a twist. Debtor has taken loans from the 401(k) plan and is now
repaying. The repayments are involuntary, so should they be deductible from
income for purposes of the Means Test?
Alik Segal
Alik.Segal@gmail.com
310-362-6157
Cal. CD, Los Angeles
401(k) contributions can be deducted from income for purposes of the Means Test, if the contribution is involuntary. For this client, the contribution is not involuntary, so the contribution is not deductible from income for purposes of the Means Test.
But here's a twist. Debtor has taken loans from the 401(k) plan and is now repaying. The repayments are involuntary, so should they be deductible from income for purposes of the Means Test?
-- Alik Segal
The post was migrated from Yahoo.