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Originally Posted by dontwantthehouse  okay, I am working on my expense / income sheet. I have a 401k so I will need to include that info as asset but can CW request that I take money out of that to get myself current or to pay for any difference? I obviously do not want to touch my 401k--don't want to get penalized or put any more money into the property. |
dontwantthehouse,
Hi, hello and hope all is well with you. No, please don't let
CW know about your 401K they cannot touch 401k's and retirement or pensions. I hope Professor Shays will share his knowledge about this issues.
Borrowing Against a Retirement Plan
Another alternative that many people utilize when they are over-burdened with credit card debt or other debt is to borrow the money they have accumulated in their 401K or other retirement plan. A retirement plan is another type of property that is ordinarily protected in a bankruptcy proceeding. It is generally a mistake to borrow from a retirement plan to pay off debts. Although the repayment to the retirement includes some rate of interest, that rate is usually low. Had the money been left in the retirement plan it would have been able to grow at a rate of two, three or even four times the rate in which the loan was being repaid.
With the growing concern of the condition of our social security system, it is important now more than ever to sufficiently provide for ones own retirement. The lost earnings that a person would experience from borrowing from their retirement to pay other debts will never be recouped.
For that reason alone, the retirement plan should never be used to pay off other debts
Information from bankruptcy law
Hope this helps.
Faith
