Would I be able to take out a 401k loan? 13 Answers as of July 02, 2013

I'm considering filing for Ch 13 bankruptcy. If I do so and pay the filing fee the same day will the automatic stay take place then or weeks later? Would I be able to take out a 401k loan which I'll be paying back through payroll deduction? Should I take a loan first?

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Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
The automatic stay goes into effect immediately upon filing. After you file you will need court permission to take out new loans (this rule has nothing to do with the automatic stay). I strongly urge everyone to not take out 401k loans if it can be avoided. The tax consequences for failing to pay it back are just too ugly.
Answer Applies to: California
Replied: 3/30/2012
Philip R. Boardman, Attorney at Law
Philip R. Boardman, Attorney at Law | Phil Boardman
The automatic stay goes into effect the moment the bankruptcy is filed. You would probably be better served taking out the loan ahead of filing but you need to discuss that with an attorney.
Answer Applies to: Virginia
Replied: 3/29/2012
Steven Harrell, Attorney at Law | Waymon Steven Harrell
You cannot borrow any money while you are under a Chapter 13 plan.
Answer Applies to: Georgia
Replied: 3/28/2012
Heupel Law
Heupel Law | Kevin Heupel
Yes, you could take a loan during the Chapter 13, but it requires the trustee's approval. It is better to obtain the loan prior to filing bankruptcy.
Answer Applies to: Colorado
Replied: 3/28/2012
Charles Schneider, P.C.
Charles Schneider, P.C. | Charles J. Schneider
In most circumstances take it out first.
Answer Applies to: Michigan
Replied: 7/2/2013
    North Sound Law, PS
    North Sound Law, PS | Spencer Bergstedt
    The automatic stay in bankruptcy begins the moment your bankruptcy case is filed. In terms of taking out a 401K loan, I suggest talking with a bankruptcy attorney about your particular situation and why you want to take out such a loan and then discuss the timing issue of the loan.
    Answer Applies to: Washington
    Replied: 3/27/2012
    Bankruptcy Law office of Bill Rubendall
    Bankruptcy Law office of Bill Rubendall | William M. Rubendall
    Filing for bankruptcy creates an automatic stay that is effective immediately. There are several factors insofar as timing of taking a 401k loan. If you intend to take it after filing you need trustee permission. If you take it before filing it might affect your payment. For instance, the trustee may consider the loan to be the same as a personal loan and not allow it in the bankruptcy.
    Answer Applies to: California
    Replied: 3/27/2012
    Law Office of Lynnmarie A. Johnson
    Law Office of Lynnmarie A. Johnson | Lynnmarie Johnson
    You cannot go in debt more than $1,000 without the Court's permission once you file bankruptcy. If you take the money out just prior to filing, it must be disclosed and the trustee is going to know exactly what you spent it on. I would check with a bankruptcy attorney before going any further either way. You can make a lot of problems for yourself inadvertently. Good luck!
    Answer Applies to: Michigan
    Replied: 3/27/2012
    Diefer Law Group, P.C.
    Diefer Law Group, P.C. | Abel Fernandez
    Once you file your case the automatic stay will take place immediately. You might want to consult an attorney about the loan because this will depend on your trustee. In most areas, the chapter 13 trustee will allow you to consider a 401(k) loan as a legitimate expense and thereby allow your monthly plan payment to be lower. So, taking out the loan first can be a good idea.
    Answer Applies to: California
    Replied: 3/27/2012
    T.K. Byrne | Timothy K. Byrne
    If you must raid your 401k , I would do so prior to filing. However, I would urge you to leave the 401k alone until you talk with counsel. Once you file your 401k becomes a loan payment under chapter 13. You need to discuss all of this with counsel. All your actions will pact your chapter13.
    Answer Applies to: Mississippi
    Replied: 3/27/2012
    The Law Office of Darren Aronow, PC
    The Law Office of Darren Aronow, PC | Darren Aronow
    You can not take a loan after you file, the automatic stay starts upon filing.
    Answer Applies to: New York
    Replied: 3/27/2012
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