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Treatment of Loans against Retirement funds in Chap 13
Tuan,
A retirement loan is treated not a debt, but as a reduction in income.
It need not be listed on Schedule D, but will show up on Schedule I and
accompanying paystubs as a deduction.
The Chapter 13 trustee will ask for the document that shows the loan
terms (date incurred, amount borrowed, date paid off). On the date the
loan is paid off, the debtor's income will increase, resulting in an
ability to repay more debt to satisfy "best efforts."
And yes, of course the retirement account itself is an asset for
Schedule B. What I try to do is put the loan terms in the description of
the asset on B, to give the trustee a heads-up on the issue.
Hale
On 8/7/2019 10:36 AM, tuanl@stevelopezlaw.com [cdcbaa] wrote:
> Dear List,
>
> I have client who borrowed against his retirement and the payments are
> being deducted directly from his paycheck. I know for the means test
> you're allowed to keep the payment deduction but how is it treated in
> the plan? Does it need to be listed in a class by itself or allowed
> to be apart of the deduction from the paycheck?
>
> I've read on this list in other topics that retirement loans are the
> debtor's money so it's not necessarily a loan? So would this mean
> that it doesn't need to be listed as a debt on Schedule D as secured
> against the retirement account?
>
> Any insight would be greatly appreciated. Thanks!
>
> Tuan Le
>
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