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=?windows-1252?Q?C13_debtor=92s_401k_buys_a_condo=2E_Debtor_moves_in_an?=
Listmates:
Here's the background on the earlier discussion in this thread: This is a
13 debtor with substantial student loans and some credit card debt. He has
a high salary, but also offsetting high medical expenses, so we settled
with the trustee on a nominal payment of $100/month. Debtor's goal is to
avoid paying student loans and other debts as long as he lives. Due to his
health problems it is uncertain how long he will live--a year or twenty
years. His only substantial asset is his pension plan with $50K. His life
situation requires him to move now, so he got the idea to borrow most or
all the money from the exempt pension plan and purchase an exempt
(California homestead) condo. (Actually he wants to buy the condo 50/50
with his brother.) Many members thought that the trustee is likely to
object that this debtor who is paying his creditors less than 100% will be
taking money from an exempt asset without paying the creditors.
I thought of another way to do this without withdrawing the money from the
pension plan. The Debtor's pension plan can buy the condo. Debtor will
then be paying fair market rent to his pension plan as the landlord. This
will require periodic appraisal of fair market rent. If the debtor pays
fair market rent to his landlord/his pension plan then he is neither
withdrawing nor contributing to the pension plan.
What do you think about this?
Alik
On Fri, Dec 2, 2011 at 3:34 PM, Kirk Brennan wrote:
> **
>
>
> One argument you could use is that the debtot will live in the condo and
> so his rent expense will be reduced. This could actually increase the
> amount of plan payments.
> On Dec 2, 2011 2:12 PM, "Law Offices of Jonathan Leventhal"
> wrote:
>
>> **
>>
>>
>> If the debtor does not pay it back then it is taxed. I have seen it
>> happen a few times.
>>
>> The bigger issue for you will be the trustee objection if it is less than
>> a 100% plan.
>>
>> Jonathan Leventhal, esq.
>> Leventhal Law Group, P.C.
>> 818-347-5800
>>
>> On Dec 2, 2011, at 1:58 PM, "AlikS" wrote:
>>
>>
>>
>> Jonathan,
>>
>> The debtor would be borrowing from his 401k, not from a 3rd party lender.
>> What kind of tax issues would this raise?
>>
>> Alik
>>
>> --- In cdcbaa@yahoogroups.com, Law Offices of Jonathan Leventhal
>> wrote:
>> >
>> > You need court approval for the new debt. Likely an objection from the
>> Trustee for the new debt and change in plan to repay debt and tax issues.
>> >
>> > Jonathan D. Leventhal, Esq.
>> > Leventhal Law Group, P.C.
>> > P: 818-347-5800
>> > F: 818-936-0302
>> >
>> >
>> >
>> > [cid:image001.jpg@...]
>> >
>> >
>> > NO EX-PARTE NOTICE VIA VOICE MAIL OR EMAIL: I do not accept e-mail
>> notice for ex parte Applications via voicemail or by email. You must comply
>> with California Law and give notice to a person in my office during regular
>> business hours.
>> >
>> > Jonathan D. Leventhal, Esq.
>> > This email and any attachments thereto may contain private,
>> confidential, and privileged material for the sole use of the intended
>> recipient. Any review, copying, or distribution of this email (or any
>> attachments thereto) by others is strictly prohibited. If you are not the
>> intended recipient, please contact the sender immediately and permanently
>> delete the original and any copies of this email and any attachments
>> thereto.
>> >
>> Of Alik Segal
>> > Sent: Thursday, December 01, 2011 11:35 PM
>> > To: NACBA BK; CDCBAA Listserv
>> > Subject: [cdcbaa] C13 debtor borrows from 401k and buys a home
>> >
>> >
>> >
>> > Group,
>> >
>> > I have an unusual situation. Help me analyze it.
>> >
>> > Debtor could not make ends meet because of student loans, so I put him
>> in a chapter 13 plan. He has 50K in a pension plan, which is of course
>> fully exempt. Debtor wants to borrow this money from the pension plan and
>> use it to buy a home.
>> >
>> > 1. What is the impact on his chapter 13 case?
>> > 2. What is the impact of his chapter 13 case on his property?
>> >
>> > A. One thing that I can see is that the money is exempt while in the
>> pension plan, but once it is borrowed and taken out of the pension plan, it
>> would lose the exemption. We have a substantial homestead exemption in
>> California (CCP 704.730), which would protect the equity in the home, but
>> this can only be done at the cost of giving up the the wild card exemption
>> (CCP 703.140(b)(5)) and exposing some of his personal property to loss.
>> >
>> > B. Repayment of pension plan loans in chapter 13 has been held to be
>> unobjectionable. In re Kimanzi Musili Mati, 390 B.R. 11, 15 (Bankr. D.
>> Mass. 2008); In re Johnson, 346 B.R. 256, 262-63 (Bankr. S.D. Ga. 2006). I
>> believe there is no 9th Circuit law on this issue.
>> >
>> > Are there other issues that I should be looking at?
>> >
>> >
>> > --
>> > Alik Segal
>> > Alik.Segal@...
>> > 310-362-6157
>> > California Central District
>> >
>>
>>
>
Alik Segal
Alik.Segal@gmail.com
310-362-6157
California Central District
Listmates:
Here's the background on
the earlier discussion in this thread: This is a 13 debtor with
substantial student loans and some credit card debt. He has a high
salary, but also offsetting high medical expenses, so we settled with the
trustee on a nominal payment of $100/month. Debtor's goal is to avoid paying
student loans and other debts as long as he lives. Due to his health
problems it is uncertain how long he will live--a year or twenty years. His only substantial asset is his pension
plan with $50K. His life situation
requires him to move now, so he got the idea to borrow most or all the money
from the exempt pension plan and purchase an exempt (California homestead)
condo. (Actually he wants to buy the
condo 50/50 with his brother.) Many
members thought that the trustee is likely to object that this debtor who is
paying his creditors less than 100% will be taking money from an exempt asset
without paying the creditors.
I thought of another way
to do this without withdrawing the money from the pension plan. The Debtor's pension plan can buy the condo.
landlord. This will require periodic appraisal of fair market rent.
n
he is neither withdrawing nor contributing to the pension plan.
What do you think about
this?AlikOn Fri, Dec 2, 2011 at 3:34 PM, Kirk Brennan <kirkinhermosa@gmail.com> wrote:
One argument you could use is that the debtot will live in the condo and so his rent expense will be reduced. This could actually increase the amount of plan payments.
On Dec 2, 2011 2:12 PM, "Law Offices of Jonathan Leventhal" <law@3yl.com> wrote:
If the debtor does not pay it back then it is taxed. I have seen it happen a few times.The bigger issue for you will be the trustee objection if it is less than a 100% plan.
Jonathan Leventhal, esq.Leventhal Law Group, P.C.818-347-5800On Dec 2, 2011, at 1:58 PM, "AlikS" <listserv.inbox@gmail.com> wrote:
Jonathan,
The debtor would be borrowing from his 401k, not from a 3rd party lender. What kind of tax issues would this raise?
Alik
@yahoogroups.com, Law Offices of Jonathan Leventhal <law@...> wrote:
>
> You need court approval for the new debt. Likely an objection from the Trustee for the new debt and change in plan to repay debt and tax issues.
>
> Jonathan D. Leventhal, Esq.
> Leventhal Law Group, P.C.
> P: 818-347-5800
> F: 818-936-0302
>
>
>
> [cid:image001.jpg@...]
>
>
> NO EX-PARTE NOTICE VIA VOICE MAIL OR EMAIL: I do not accept e-mail notice for ex parte Applications via voicemail or by email. You must comply with California Law and give notice to a person in my office during regular business hours.
>
> Jonathan D. Leventhal, Esq.
> This email and any attachments thereto may contain private, confidential, and privileged material for the sole use of the intended recipient. Any review, copying, or distribution of this email (or any attachments thereto) by others is strictly prohibited. If you are not the intended recipient, please contact the sender immediately and permanently delete the original and any copies of this email and any attachments thereto.
>
cbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of Alik Segal
> Sent: Thursday, December 01, 2011 11:35 PM
> To: NACBA BK; CDCBAA Listserv
> Subject: [cdcbaa] C13 debtor borrows from 401k and buys a home
>
>
>
> Group,
>
> I have an unusual situation. Help me analyze it.
>
> Debtor could not make ends meet because of student loans, so I put him in a chapter 13 plan. He has 50K in a pension plan, which is of course fully exempt. Debtor wants to borrow this money from the pension plan and use it to buy a home.
>
> 1. What is the impact on his chapter 13 case?
> 2. What is the impact of his chapter 13 case on his property?
>
> A. One thing that I can see is that the money is exempt while in the pension plan, but once it is borrowed and taken out of the pension plan, it would lose the exemption. We have a substantial homestead exemption in California (CCP 704.730), which would protect the equity in the home, but this can only be done at the cost of giving up the the wild card exemption (CCP 703.140(b)(5)) and exposing some of his personal property to loss.
>
> B. Repayment of pension plan loans in chapter 13 has been held to be unobjectionable. In re Kimanzi Musili Mati, 390 B.R. 11, 15 (Bankr. D. Mass. 2008); In re Johnson, 346 B.R. 256, 262-63 (Bankr. S.D. Ga. 2006). I believe there is no 9th Circuit law on this issue.
>
> Are there other issues that I should be looking at?
>
>
> --
> Alik Segal
> Alik.Segal@...<mailto:Alik.Segal@...>
> 310-362-6157
> California Central District
>
-- Alik SegalAlik.Segal@gmail.com310-362-6157California Central District
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