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401k Plan Loan following repayment of pre-existing
I'm not sure how the debtor can bypass disclosure of the loan because chapter 13 plan payments typically step-up when retirement account loans end during the plan's duration and a motion to modify plan would be presumably be required to continue payments under the new loan.
Given 1306's wide net, my guess is that the loan transformsexempt retirement funds into non-exempt cash in debtor's hands (or bank account) that areproperty of the estate and at risk for increasing the payout to unsecured creditors unless debtor has extraordinary expense or loss of income to counterbalance the transaction.
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On Thursday, August 13, 2015 3:46 PM, "jesseelaw@aol.com [cdcbaa]" wrote:
The 401(k) is not an asset of the Chapter 13 estate, Regardlessa new 401(k) loan will effect the debtor's budget with the higher repayment amount being deducted from the paycheck, so Court approval is required. Additionally, the current 401(k) loan the debtor wants to pay off in order totake out the higher loan amount is almost always a five year term.Thus if the debtor's Chapter 13 plan term is 5 years,ior to the plan completionwhich wouldresult inadditional disposable income available to pay into the plan for the remainder of the plan term.Accordingly amotion to modifythe plan may also be necessary.Mark T. Jessee
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ion-filing and confirmation of their plan back in 2012. They still owe over $10,000 and would like to borrow double what they owe after first paying back the $10,000. Characterizing this as a loan makes this sound as proscribed by the standard Ch. 13 confirmation order that prohibits incurring credit of more than $500 without Court authorization. However, I recall that some cases say this is not truly a loan on the basis that it is the Debtor's own money because they can only borrow up to half of the amount they have actually contributed already, anyway. The plan pays around 20% to unsecured claims. I would suspect some attorney among the membership may have actual experience with this. Does anybody think it would violate the Court's order to do this transaction without requesting an order to approve it?
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