Does anyone know if you have to get approval from the court before you can borrow from a 401K and pay a Chapter 13 off early? I have been paying almost 3 years on a 5 year 100% plan. Thanks.

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Originally Posted by Curious1003

Does anyone know if you have to get approval from the court before you can borrow from a 401K and pay a Chapter 13 off early? I have been paying almost 3 years on a 5 year 100% plan. Thanks.

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I don't know the answer if you have to get court approval but the atty who handled the bankruptcy for you will know. Keep in mind that 401(k) money is your money for a special purpose and that purpose is generally for you when you retire or for your beneficiay should you die. It's so special that is protected from the claims of creditors. It's also tax shelted going in and,accumulates tax free unlike many other investments. It's also taxed heavily when you draw it out for all but a few reasons. I would encourge you to use that money only as a last resort. Loans are treated somewhat differently that complete cashing out and in some cases loans are not permitted at all depending on the plan rules.