Can I use 401k to pay the trustee under Chapter 13? - Bankruptcy Law Questions and Answers- LawQA.com

Free Answers to your Legal Questions by Lawyers.
ask »


Can I use 401k to pay the trustee under Chapter 13?

Can I use 401k to pay the trustee under Chapter 13? I was wondering if I can withdraw and make payments using 401k.

Answer By Marc S. Stern
Marc S. Stern
Contact this Attorney Now

Yes you can but you will incur substantial tax liability if you are not above retirement age.

Answer Applies to: Washington
Replied: 6/6/2012

Answer By Roger J. Bus

Contact this Attorney Now

Some Trustees do not Object to that practice.

Answer Applies to: Michigan
Replied: 5/30/2012

Answer By Harry D. Roth

Contact this Attorney Now

So long as you exempted the property in your schedules, yes, you can do that. Being in bankruptcy does not save you from the penalties or taxes for the early withdrawal from a 401(k). There are a few things for which you can withdraw from a 401(k) and not be penalized; this is not one of them. That said, while it is permissible to do this, that does not make it smart. If you can't make your payments from your regular income, something is wrong and maybe that something is being in a chapter 13 at all. Stop and smell the roses and ask yourself why you are in a 13, what it is costing you and whether it is worth it in the end. If you can't answer those questions, you are probably in the wrong chapter or maybe should not be in bankruptcy at all.

Answer Applies to: California
Replied: 5/16/2012

Bankruptcy Law office of Bill Rubendall
Contact this Attorney Now

Check with the chapter 13 trustee to see whether this can be authorized.

Answer Applies to: California
Replied: 5/16/2012

Answer By Edward M Olson

Contact this Attorney Now

It is legal. However, I do not recommend it. Withdrawing funds from a retirement account will almost always have tax consequences. In addition, you are using exempt assets to pay unsecured creditors. If you can make the plan payments with your ordinary income, you should. If you cannot make the payments on your current income, then you need to speak with your bankruptcy attorney as soon as possible. The judge has the power to dismiss your case if you miss even one payment under the plan.

Answer Applies to: Michigan
Replied: 5/16/2012

Answer By Michael Johnson
Law Office of Michael Johnson
Contact this Attorney Now

Yes. But it is not recommended.

Answer Applies to: Florida
Replied: 5/16/2012

Answer By Mengjun Qiu
The Law Offices of Kristy Qiu
Contact this Attorney Now

Yes you can use 401k.

Answer Applies to: Florida
Replied: 5/16/2012

Answer By Pho Ethan Tran
Law Office of Pho Ethan Tran PLLC
Contact this Attorney Now

Your 401K is exempt from the bankruptcy estate and should not be withdrawn to make payments.

Answer Applies to: Texas
Replied: 5/16/2012

Answer By Darren Aronow
The Law Office of Darren Aronow, PC
Contact this Attorney Now

You would have to file a motion to get court permission to do so, because you are taking a loan which will come out of your paycheck and reduce your net weekly income.

Answer Applies to: New York
Replied: 5/16/2012

Answer By Alvin Lundgren

Contact this Attorney Now

You will have to pay stiff penalties for withdrawing from your 4014(k). Talk to your attorney about modifying your plan.

Answer Applies to: Utah
Replied: 5/15/2012

© 2017 MH Sub I, LLC. All rights reserved.
Terms & Conditions | Privacy Policy | IB Cookie Policy