401k Plan Loan following repayment of pre-existing loan
Posted: Thu Aug 13, 2015 3:46 pm
The 401(k) is not an asset of the Chapter 13 estate, Regardless a 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 to take
out the higher loan amount is almost always a five year term. Thus if thedebtor's Chapter 13 plan term is 5 years, the loan was likely scheduled to be
otherwise paid off prior to the plan completion which would result in
additional disposable income available to pay into the plan for the remainder of
the plan term. Accordingly a motion to modify the plan may also be
necessary.
Mark T. Jessee
Law Offices of Mark T. Jessee
"A Debt Relief Agency"
50 W. Hillcrest Drive, Suite 200
Thousand Oaks, CA 91360
(805) 497-5868 (805) 497-5864 (Facsimile)
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In a message dated 8/13/2015 1:18:31 P.M. Pacific Daylight Time,
cdcbaa@yahoogroups.com writes:
My clients have had a 401k loan they've paying off since the
petition-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 bythe standard Ch. 13 confirmation order that prohibits incurring credit ofmore 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?
Giovanni Orantes, Esq.*
Orantes Law Firm, P.C.
3435 Wilshire Blvd. Suite 2920
Los Angeles, CA 90010
Tel: (213) 389-4362
Fax: (877) 789-5776
e-mail: _go@gobklaw.com_ (mailto:go@gobklaw.com)
website: _www.gobklaw.com_ (http://www.gobklaw.com/)
*Certified Bankruptcy Specialist, State Bar of California, Board of Legal Specialization
*Board Certified - Business Bankruptcy Law - American Board of
Certification
*Board Certified - Consumer Bankruptcy Law - American Board of
Certification
Commercial Litigation
Estate Planning
Outside General Counsel
WE ARE A "DEBT RELIEF AGENCY" AS DEFINED BY FEDERAL LAW.
SERVING BAKERSFIELD, LOS ANGELES, ORANGE COUNTY, RIVERSIDE, SAN BERNARDINOAND SANTA BARBARA AND THE WORLD FOR CHAPTER 11 AND 15 CASES.
The 401(k) is not an asset of the Chapter 13 estate,
Regardless a new 401(k) loan will effect the debtor's budget with thehigher 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 to take out the higher loan amount is almost always a five
year term. Thus if the debtor's Chapter 13 plan term is 5 years, the
loan was likely scheduled to be otherwise paid off prior to the
plan completion which would result in additional disposableincome available to pay into the plan for the remainder of the plan
term. Accordingly a motion to modify the plan may also be
necessary.
Mark T.
JesseeLaw Offices of Mark T. Jessee"A Debt Relief Agency"50 W.Hillcrest Drive, Suite 200Thousand Oaks, CA 91360(805) 497-5868 (805)
497-5864 (Facsimile)NOTICE TO RECIPIENT: THIS E-MAIL IS MEANT FOR ONLY
THE INTENDED RECIPIENT OF THE TRANSMISSION, AND THIS COMMUNICATION IS INTENDED
TO BE PRIVILEGED BY LAW. IF YOU RECEIVED THIS E-MAIL IN ERROR, ANY REVIEW, USE,
DISSEMINATION, DISTRIBUTION, OR COPYING OF THIS E-MAIL IS STRICTLY PROHIBITED.
PLEASE NOTIFY US IMMEDIATELY OF THE ERROR BY RETURN E-MAIL AND PLEASE DELETE
THIS MESSAGE FROM YOUR SYSTEM. THANK YOU IN ADVANCE FOR YOUR COOPERATION
In a message dated 8/13/2015 1:18:31 P.M. Pacific Daylight Time,
cdcbaa@yahoogroups.com writes:
My clients have had a 401k loan they've paying off since the
petition-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?
--
Giovanni Orantes, Esq.*
Orantes Law Firm, P.C.3435 Wilshire Blvd. Suite 2920Los Angeles,
CA 90010Tel: (213) 389-4362Fax: (877) 789-5776e-mail: go@gobklaw.comwebsite: www.gobklaw.com
*Certified
Bankruptcy Specialist, State Bar of California, Board of Legal
Specialization
*Board Certified - Business Bankruptcy Law - American Board of
Certification
*Board Certified - Consumer Bankruptcy Law - American Board of
Certification
Commercial Litigation
Estate Planning
Outside General Counsel
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