DayOne Posted May 23, 2007 Report Share Posted May 23, 2007 HelloAs an addition to my previous thread, my Bk is imminent. I have yet to miss any CC payments but lately all the payments have been made from borrowed money from my 401k.Should I just stop making payments now? Is your credit any worse if you miss payments before a BK? My debt is from a business and it is a lot. All under my name.I still have to get 2 years tax returns for business and personal done before I can file so it is a little ways off. I just want to make the bleeding stop.Thanks Link to comment Share on other sites More sharing options...
willingtocope Posted May 23, 2007 Report Share Posted May 23, 2007 Yes, stop paying now. And stop taking money out of your 401k...you'll have to pay taxes and penalty on that regardless of the BK. Link to comment Share on other sites More sharing options...
DayOne Posted May 23, 2007 Author Report Share Posted May 23, 2007 Thanks for the info. I don't think there is a penalty for the money because I borrowed it a while ago for a different purpose. It was not intended for this use.I am sure I will have more questions as it unfolds. The info on the board has been very helpful.Thanks again. Link to comment Share on other sites More sharing options...
willingtocope Posted May 23, 2007 Report Share Posted May 23, 2007 If you borrowed against your 401k, then no taxes involved. If you withdrew money from your 401k, then the IRS will want to talk to you.(I'm not sure if your 401k loan would be discharged in BK...talk that over with your lawyer). Link to comment Share on other sites More sharing options...
jq26 Posted May 23, 2007 Report Share Posted May 23, 2007 If you borrowed against your 401k, then no taxes involved. If you withdrew money from your 401k, then the IRS will want to talk to you.either way, if a BK is imminent as you suggest, you are throwing good money after bad. Immediately stop making payments. Link to comment Share on other sites More sharing options...
momof5 Posted May 23, 2007 Report Share Posted May 23, 2007 BTW, I don't know if the new BK laws changed this or not...When I filed, I owed the IRS $16K plus fines and interest. The $16K was not dischargeble, but the fines and interest were! Link to comment Share on other sites More sharing options...
DayOne Posted May 23, 2007 Author Report Share Posted May 23, 2007 I'm not sure if your 401k loan would be discharged in BK.Is that possible? That could make my day if it were true.Thanks again. Link to comment Share on other sites More sharing options...
jq26 Posted May 23, 2007 Report Share Posted May 23, 2007 Is that possible? That could make my day if it were true.Thanks again.I do not think 401k loans are dischargeable. Since the net result of this would be the ability to receive income without ever paying taxes on it, I doubt the feds would allow a discharge. After all, you are playing both sides here as your own creditor and debtor. I think what happens is that it is just included in your income in the year of discharge and then the IRS will "settle up" with you when you file a return. It may take the form of a reduced refund or a tax bill next April 15th. Link to comment Share on other sites More sharing options...
DayOne Posted May 23, 2007 Author Report Share Posted May 23, 2007 I think you are probably right. Link to comment Share on other sites More sharing options...
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