As long as your 401(k) is ERISA qualified and was exempted (protected) in your bankruptcy petition, you can most likely take a loan against the account while in an active Chapter 13 bankruptcy. However, you MUST get the court’s permission!
When you are filing for bankruptcy, one of the top concerns is to protect your assets. There are federal and state exemptions available to protect any equity or funds in your possessions. A 401(k) plan is a common account that should be protected from the bankruptcy creditors. Through the case of Patterson vs. Shumate, there is no limit to the amount that may be protected under this exemption as long as the plan or account is ERISA qualified (Employee Retirement Income Security Act of 1974). You will need to provide documentation proving the plan is ERISA qualified, such as a copy of the plan summary that includes the ERISA statement.
To obtain a loan from your 401(k) while in a Chapter 13 bankruptcy you must get the court’s permission. Your bankruptcy lawyer can do so by filing a Motion to Incur Debt. You would have to appear in front of the judge to get the judge’s permission. The judge will usually grant permission to pull from your 401(k) loan if you can provide a good reason for why you need the money. This, typically, needs to be something that is a necessity, not just a “want”. An example of this may be if you need money to purchase a vehicle after another one has broken down or if you need money to pay medical expenses that were incurred after the filing of the bankruptcy. Discuss this with your bankruptcy lawyer before starting the loan withdrawal process.
https://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.png00Damon Duncanhttps://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.pngDamon Duncan2011-07-15 09:00:022011-07-15 09:00:02Can I Take Out A 401(k) Loan After Filing Chapter 13 Bankruptcy?
Your mailing address is very important while you are in an active bankruptcy. Your attorney as well as the Trustee and/or Bankruptcy Court, send you important documents during your bankruptcy for a number of reasons, such as updating you on the status of your case or sending you your final decree which lets you know your case is closed.
In a Chapter 7 bankruptcy, from your filing date, you will receive your Final Decree within 4 to 6 months. As long as you have a mailing address that will remain the same during that time period, there should not be an issue. However, in a Chapter 13 bankruptcy, it will be 3 to 5 years before you receive your final decree. Therefore, it may be more likely for you to switch residences. You should notify your attorney of your updated address, so they may file a notice of address change with the bankruptcy court. This is important because it will ensure that you receive important and time sensitive information from the bankruptcy court.
Also, please be aware that if you are selling your home, you must request permission from the Bankruptcy Court to transfer that property while in an active bankruptcy, regardless of which chapter you file.
https://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.png00Damon Duncanhttps://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.pngDamon Duncan2011-07-13 09:00:002015-04-13 02:48:55What If I Move During My Bankruptcy?
The short answer is yes. However, there is a bit of a process behind purchasing a vehicle in a Chapter 13. First, your budget needs to be reviewed. This requires your bankruptcy attorney to review your income and your expenses to make sure you can afford to have an extra payment in your budget. Once it has been established that you are able to make a new car payment, a request to purchase a car must be made to the Bankruptcy Court. This is done through a process called a Motion to Incur Debt.
After your bankruptcy lawyer files the Motion to Incur Debt the bankruptcy judge will evaluate your situation to make sure that you can make the monthly payments without any problems. If there are problems, they will deny your ability to get financing for the vehicle. It is the judge’s job to make sure that you do not incur new debt and end up in the same situation that caused you to file bankruptcy in the first place.
What if you plan to buy a car without financing? You will still need to obtain permission; additionally, you will need to explain where the lump sum of money came from. It is always best to discuss this possibility with your attorney first to remove any possible issues that may arise from the access of extra money.
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https://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.png00Damon Duncanhttps://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.pngDamon Duncan2011-07-08 09:00:472017-01-07 20:53:54What is the Necessities Doctrine?
https://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.png00Damon Duncanhttps://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.pngDamon Duncan2011-07-06 09:00:502018-06-05 12:01:32What Is A Writ of Execution?
If you have a credit card or a loan with a zero balance, it is a personal decision whether you include them on your bankruptcy. If there no balance, it may not be necessary to include them on your bankruptcy filing; however, it may be in your best interest to include them should there be any fees or interest charges that were placed on your account during the most recent billing cycle.
Regardless of whether you include the creditor on your bankruptcy, the creditor will most likely find out about your bankruptcy filing and terminate your privileges with them. For example, if you have a line of credit with no balance, you will most likely be unable to take any future draws on the line of credit. The same would apply with a credit card. Although you did not include the credit card company on your bankruptcy, they will most likely terminate your card. As a result, attempting to make charges on the credit card after filing bankruptcy could lead to an embarrassing event.
If you have a credit card you would like to retain and use after filing bankruptcy, you will need to contact the credit card company in advance of filing bankruptcy and determine if their policy would allow you to keep the card. A few companies have been willing to allow you to continue to use the credit card after filing bankruptcy; however, that is the exception. Do not wait until after your bankruptcy has been filed to contact the creditor, since they will most likely not be willing to speak with you. In addition, if you fail to include them in your bankruptcy filing and determine there was a balance on the account, you may be charged fees to add them to your bankruptcy. As a result, it is always the safest approach to include the creditor on your bankruptcy filing regardless of whether there is a current balance.
https://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.png00Damon Duncanhttps://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.pngDamon Duncan2011-06-29 09:00:022015-04-13 02:59:48Do I Need to Include a Creditor on My Bankruptcy If There Is No Balance on the Account?
Filing bankruptcy is not as simple as it once was. You have to meet certain qualifications to determine which bankruptcy you may file. This is normally done by what is referred to as the Means Test. The Means Test will determine how your household income compares to the State median income and whether or not you can afford to pay some of your debts back or can qualify for them to be wiped out.
The Means Test is based on the household income. Household includes anyone living in the home who receives income of some sort, which would include your spouse. Regardless of whether or not they file the bankruptcy with you, the court looks at the combined household income for purposes of the Means Test. The bankruptcy court basically enacted this law to make sure that you cannot take advantage of creditors by one spouse filing a Chapter 7 bankruptcy to wipe out all of their unsecured debt while the other spouse is making $150,000 a year. Therefore, the household income is used for purposes of the Means Test.
One part of the Means Test deals with your income but another takes into consideration your expenses each month. Any secured payments, taxes, health insurance, and other “qualified” deductions would be reflected. If you are in the situation where you may be filing bankruptcy but your spouse is not, then this is where you would reflect any of the deductions that your spouse has as well. This gives you the opportunity to show the court that while all of your income may be combined, your spouse still has their own debts. Maybe there are small amounts of credit card payments that are only in your spouse’s name and they want to continue to pay those or a vehicle that is solely in their name only they are obligated to pay.
Unfortunately, the saying, “What’s mine, is yours” goes a long way and the court understands that income and expenses for a household are combined. The court is simply making sure that you cannot “get over” the system. Including your spouse’s income and expenses in the Means Test is the best way to ensure that a person or couple filing bankruptcy is doing it in the fairest way possible. We understand this question is, often times, asked because you are worried about your spouse’s credit. Including your spouse’s income in the bankruptcy will not have a negative impact on their credit.
https://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.png00Damon Duncanhttps://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.pngDamon Duncan2011-06-27 09:00:252015-04-13 03:02:12Why Do I Have to Include My Spouse’s Income If They Are Not Filing Bankruptcy?
You will still be responsible for the loan or debt on your vehicle even if you voluntarily turn it in. If you have a vehicle that you cannot make payments on, you have the choice of voluntarily surrendering the car or you can let the creditor repossess it. What many people do not know is voluntarily surrendering the vehicle is still considered a reposession on your credit report, a voluntary reposession.
https://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.png00Damon Duncanhttps://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.pngDamon Duncan2011-06-24 09:00:152016-02-28 20:15:39Am I Responsible for the Loan On My Car If I Voluntarily Turn it In?
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The Fair Debt Collection Practices Act is an act that was passed to keep consumers from being abused by creditors. Already feeling abused and harassed by the constant calls or the condescending tones or the threatening letters? There is something you may be able to do about it.
Whenever my mother was frustrated by someone or some corporation she would firmly state, “I’ll show them, I am going to write them a letter.” It doesn’t sound empowering, yet in this case, she was definitely onto something. Under this act, you are allowed to write a letter to each creditor requesting they stop contacting you. This is also commonly revered to as a cease and desist letter. Make sure you make copies of this letter and send it certified mail to all your creditors. One caveat: this only prevents them from contacting you on a regular basis; the company is still within their own rights to take legal action they deem necessary. Also, this letter does not magically erase this debt- but a Chapter 7 bankruptcy may be able to wipe out your debt! Once the creditor has received this letter the only contact they may engage in is to let you know they have received your request and will honor it, or to let you know they have taken legal action.
In addition, this Act also limits the times and the places a creditor may solicit payment from you. For instance, they are only limited to the hours of 8am to 9pm to call- not that your phone gets much rest, but at least you can sleep with your phone on and know only emergencies are calling you during the night!
Now the important question: are creditors allowed to contact me at work? Unfortunately, they may call once if they somehow obtain your work number, but if they are verbally told or in writing told they are prohibited, it is in violation of this act if they continue to do so. This also goes for third parties, such as family members.
I have retained Duncan Law, PLLC for our bankruptcy, will that stop creditor calls? Once you have retained an attorney, you may give the creditor your attorney’s information. At that point, they will typically stop contacting you because they know they aren’t going to be able to collect the debt – they would rather move on to the next person they think they may actually be able to get money from. However, they are not required to stop all forms of communication to collect a debt until you have actually filed the bankruptcy.
If you feel as though you are being treated unfairly by a creditor who is trying to collect a debt from you, visit the Federal Trade Commission’s Guide for Consumers to learn how to report improper collection attempts.
Garnishment- yikes! Can creditors take my paycheck or tax refund or bank account? The only way a creditor may access your funds and assets is by entering a legal action with the court, such as a suing you. If the creditor wins, then the court will enter a garnishment order on the creditor’s behalf. Federal Benefits: most of these are protected and may not be garnished under any circumstance. However, if you owe student loans, taxes, child support or alimony, be prepared to have you monthly income docked automatically if you are behind on these payments.
If you are being sued, always answer the complaint. You may represent yourself, which is also known as pro se representation. If you choose to work with us we can help show you how to answer the complaint served against you.
When all seems lost and you feel as though no one is on your side, take a second and read over your rights under the Fair Debt Collection Practices Act. Most people in your position are at this point due to unforeseen circumstances and have already exhausted every option. Bankruptcy is a way to get a fresh financial start, but until then, use this Act to protect your privacy, your phone, and your sanity.
https://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.png00Damon Duncanhttps://www.duncanlawonline.com/wp-content/uploads/2015/01/duncanlawlogo.pngDamon Duncan2011-06-15 09:00:252015-04-13 03:10:00What is the Fair Debt Collection Practices Act?
As long as your 401(k) is ERISA qualified and was exempted (protected) in your bankruptcy petition, you can most likely take a loan against the account while in an active Chapter 13 bankruptcy. However, you MUST get the court’s permission!
