Can I claim the 401k loan in my bankruptcy? 18 Answers as of December 11, 2014

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GARCIA & GONZALES, P.C.
GARCIA & GONZALES, P.C. | Richard N. Gonzales
Yes, but your 401(k) will be offset.
Answer Applies to: Colorado
Replied: 12/11/2014
Tokarska Law Center
Tokarska Law Center | Kathryn U. Tokarska
You cannot discharge a 401k loan. It is a debt you owe to yourself. If you separate from your employer and the loan is not paid off, there can be tax consequences for early withdrawal.
Answer Applies to: California
Replied: 12/11/2014
Russell & Heffner, LLC | Lawrence E. Heffner, Jr.
When you borrow from your 401(k) you are essentially borrowing from yourself. As a consequence the loan is non-dischargeable.
Answer Applies to: Maryland
Replied: 12/11/2014
Ronald K. Nims LLC | Ronald K. Nims
You're required to list all debts in your bankruptcy schedules but 401(k) loans are not dischargeble in bankruptcy.
Answer Applies to: Ohio
Replied: 12/11/2014
Deborah F Bowinski, Attorney & Counselor at Law | Debby Bowinski
Chances are that if you are still employed by the company that your 401K is through, you will be required to continue to repay the loan by way of payroll deductions. If you no longer work for the same company then you are still expected to repay the loan, but if you don't then it will be treated and taxed as an early retirement account distribution. Be careful that you understand the penalty and tax consequences involved.
Answer Applies to: Colorado
Replied: 12/10/2014
    Rhymer Law Firm
    Rhymer Law Firm | William Rhymer
    If you mean discharge it, generally not. There are special Federal Laws that treat 401k loans different than ordinary loans. Some times you can stop paying it and the 401k administrator will payoff the loan from your 401k. You would have to pay taxes on the amount used to pay off the loan.
    Answer Applies to: Georgia
    Replied: 12/10/2014
    The Law Office of Darren Aronow, PC
    The Law Office of Darren Aronow, PC | Darren Aronow
    You can not discharge it if that is what you are asking. You borrower your own retirement money. It is not dischargeable
    Answer Applies to: New York
    Replied: 12/10/2014
    A Fresh Start
    A Fresh Start | Dorothy G Bunce
    It is money you owe to yourself. You will still have to pay taxes on the withdrawal. My practice is to list the debt but then continue to repay it and to include the payments in the budget.
    Answer Applies to: Nevada
    Replied: 12/10/2014
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    I'm not sure what you mean by "claim" - are you asking if it is a deduction on your means test? There is a split of authority on that since you are essentially paying yourself back. Check with local counsel.
    Answer Applies to: California
    Replied: 12/10/2014
    Law Office of Melissa Botting | Melissa Botting
    The short answer is - you cannot be discharged of a 401K loan in a chapter 7. The loan is secured by your 401K. Secured debts are either reaffirmed (paid according to the contract), paid the fair market value of the collateral ( in this the cash) or surrendered. If you wish to cash in your 401K to stop making the payments, you will be assessed applicable early withdrawal penalties.
    Answer Applies to: Texas
    Replied: 12/10/2014
    Law Office of Michael Johnson
    Law Office of Michael Johnson | Michael Johnson
    No, because it is your own money.
    Answer Applies to: Florida
    Replied: 12/10/2014
    Scott Goldstein | Scott Goldstein
    It is not dischargeable and must be repaid.
    Answer Applies to: New Jersey
    Replied: 12/10/2014
    Garner Law Office
    Garner Law Office | Daniel Garner
    You are probably the creditor on a 401k loan, so if you don't repay it, you will have to pay taxes on the loan and possibly a penalty. Talk to your retirement account administrator about your options.
    Answer Applies to: Oregon
    Replied: 12/9/2014
    Law Office of Andrew Oostdyk
    Law Office of Andrew Oostdyk | Andrew Oostdyk
    Yes, but you will need to report the unpaid balance of the loan to the IRS as if it were a withdrawal. You should consult with a CPA or tax attorney to determine if you are subject to taxes and/or penalties by no longer passing the loan.
    Answer Applies to: Texas
    Replied: 12/9/2014
    Law Offices of Daniel J Winter
    Law Offices of Daniel J Winter | Daniel J Winter
    The short answer is no. This is a required loan to pay. You are essentially paying your retirement plan back. If you stop paying on the 401k loan, you will be in default, and your 401k would probably have to be cashed, with penalties, to take care of it. Then, you'll be taxed on whatever isn't paid back. Before stopping your payments or cashing your 401k, you should talk to an accountant. And, if you have other debts as well, you should call a bankruptcy lawyer asap.
    Answer Applies to: Illinois
    Replied: 12/9/2014
    Freeman Law Group, LLC
    Freeman Law Group, LLC | Derek Freeman
    Do you mean, "Can my 401k loan be discharged in a chapter 7 bankruptcy?" If that's what you mean, then the answer is no, it cannot. Your 401k loan is borrowed against money that is yours. You will have to continue to have payments taken out of your paycheck until the loan amount is paid off. In a chapter 13, usually 401k loan payments continue to be taken out of your paycheck until paid off, at which time your chapter 13 payments increase by the same amount. There's usually no way around paying off your 401k loan, unless you get fired or quit your job.
    Answer Applies to: Colorado
    Replied: 12/9/2014
    Marc S. Stern
    Marc S. Stern | Marc S. Stern
    401(k) loans are non-dischargeable. That is important to you because if they were discharged, you would income. If you do not pay a 401(k) loan, the amount is taxable to you.
    Answer Applies to: Washington
    Replied: 12/9/2014
    D.J. Rausa, Attorney at Law | D.J. Rausa
    A 401k loan is not a dischargeable debt because it is your debt. you can pay it back, or not. It is up to you.
    Answer Applies to: California
    Replied: 12/9/2014
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