401k loans berfore filing Bankruptcy
I understand if there has been a change in income, First thought is not to file a bankruptcy. Maybe cutting back on expenses, not eating out,and several other choices.
Taking a loan against your 401 is not a good one. If the problem is because of a one time event, and you can truly afford the payback amount, ok maybe!
If the change is because of a loss in income the 401k loan is not a good choice. The added payment adds up to mean you have less money each month.
If after all your tries including the 401k loan and now the choice is a chapter 7 bankruptcy the loans could keep you from qualifying, because that money still counts as income. Meaning your paying yourself something, you can afford to pay something to everybody else.
IF the bankruptcy choice is a chapter 13 then pay back amount will count as an expense, but you still have less money to live on.
Unlike credit cards the 401 loans are not dis chargeable meaning if you can’t afford your home you will lose it but still have the 401 loan to pay back.
Please fill out our free evaluation form to determine if bankruptcy is right for you.
