QUESTION
If Chapter 13 payments are now 100%, can I do a 401k hardship withdrawal?
Asked on May 23rd, 2017 on Bankruptcy - Colorado
More details to this question:
Recently my grandmother passed away and left me a share of her property that was in the form of a trust. I am currently living in that property. The trustee has bumped my payments up to 100% of the claims and he said if I wanted to pay in full with my 401k I'm allowed to. My question is would this qualify as a hardship withdrawal if I wanted to pay in full since my 401k only allows hardship withdrawals.
6 ANSWERS
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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401(k) plans have many options. One of those options is the terms of hardship withdrawals. So, what's a hardship withdrawal at one employer might not be a hardship withdrawal at another employer. However, even if it's a hardship withdrawal, you'll pay significant taxes and reduce your retirement benefits. Unless you want to be working at 75, I recommend you don't touch your retirement money.
Answered on Aug 12th, 2017 at 7:17 AM
This does not sound like a well-reasoned decision If you are paying your creditors 100% in your chapter 13, you are actually paying a lot more than 100% because there is a trustee commission added to every payment you make through the trustee. If you can come up with a lump sum of cash to pay off your plan, it is likely your creditors would accept less than 100% to settle with you and your Chapter 13 could be dismissed.
Answered on Aug 09th, 2017 at 4:27 PM
Bankruptcy Attorney serving Madison, WI
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Richard B. Jacobson & Associates, LLC
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You must check with the trustee of the 401(k) funds.
Answered on Aug 09th, 2017 at 4:25 PM
That's a question for your 401(k) plan.
Answered on Aug 09th, 2017 at 4:24 PM
Bankruptcy Attorney serving Grand Rapids, MI
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David Andersen & Associates, PC
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If your 401K plan administrator will allow it then paying off your Chapter 13 should be an option.
Answered on Aug 09th, 2017 at 4:21 PM
Maybe. Contact the Administrator of your 401(k).
Answered on Aug 09th, 2017 at 4:18 PM