Cashing out 401k to pay trustee

[Beaconmember1]

I had to file a chapter 13 bankruptcy to try to strip a lien from my condo. I also have unsecured debt I've been making payments on in order to keep my belongings. I currently now owe $5,680. The motion to strip a lien hearing did not go in my favor so my attorney said I can go back to a chapter 7 in order to pay off my debt earlier. My condo is now in foreclosure and the credit union can take my condo at any time so I need to get out of dept and re-establish my credit asap so I can purchase another home. My question is, once I convert back to a chapter 7 can I cash out my 401k so I can use that money to pay off my trustee the remaining money that I owe without the trustee charging me more, since once I cash out my 401k it no longer is an exemption. Or will the trustee just accept the remaining pay off amount and call it all paid in full?

[Nutria]

re-establish my credit asap so I can purchase another home.

Worst. Idea. Ever.

Credit doesn't buy homes; cash buys homes (for that 20% DP), and you don't have any.

My question is, once I convert back to a chapter 7 can I cash out my 401k

I'm sure you can cash it out... Probably isn't wise, though. Lots of taxes and penalties.

so I can use that money to pay off my trustee the remaining money that I owe without the trustee charging me more

Why would he do that?

Or will the trustee just accept the remaining pay off amount and call it all paid in full?

How do we know someone else's mind, without any knowledge of how much you owe him, how much you've paid him, how you've treated him, what your job prospects are, etc, etc, etc?

[PhilDanley]

Have you already been making your Chapter 13 payments? If so then the trustee is getting his monthly fee. If you change to Chapter 7 then those monthly payments stop and you shouldn't owe anything more to the trustee other than whatever percentage or fee he is entitled to from the Chapter 7 assets.

Are you asking if you have to continue your Chapter 13 trustee fees if you convert to a 7?

I would run every question through your attorney so you don't make any mistakes. That's what you're paying him/her for!

[Petunia 100]

Please don't cash out your 401k balance. The taxes and penalties are severe and you will never regain the lost compounding.

It is likely the only asset you will have left after foreclosure and bankruptcy. Hang onto it.

[sv2007]

I had to file a chapter 13 bankruptcy to try to strip a lien from my condo. I also have unsecured debt I've been making payments on in order to keep my belongings. I currently now owe $5,680. The motion to strip a lien hearing did not go in my favor so my attorney said I can go back to a chapter 7 in order to pay off my debt earlier. My condo is now in foreclosure and the credit union can take my condo at any time so I need to get out of dept and re-establish my credit asap so I can purchase another home. My question is, once I convert back to a chapter 7 can I cash out my 401k so I can use that money to pay off my trustee the remaining money that I owe without the trustee charging me more, since once I cash out my 401k it no longer is an exemption. Or will the trustee just accept the remaining pay off amount and call it all paid in full?

Why buy another home. Buying a home then losing it via foreclosure is financially irresponsible and likely hurts you financially too.

I'd rent in your situation. And if you have to take distribution out of 401k for Ch 13, then go to Ch 7, where I think your retirement accounts are protected.

Does you bankruptcy attorney have any recommendations?

[sv2007]

Worst. Idea. Ever.

Credit doesn't buy homes; cash buys homes (for that 20% DP), and you don't have any.

..

I agree it's a bad idea.

But you'd be amazed at the way some people can borrow money for a house. Less than good credit doesn't seem to be a major problem for many. Nor is the down payment. They'll get a loan, then we'll be paying to bail them out on the next crash again : )