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Ellen
Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36714
Experience:  Bankruptcy Lawyer. Experienced.
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We filed for Chapter 7 bankruptcy on October 6th. We had our

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We filed for Chapter 7 bankruptcy on October 6th. We had our 341 meeting on November 17th. We lost one of our vehicles right before we filed, and we are reaffirming the one we still have. We NEED two vehicles for both of us to be able to get to work. Last week we borrowed 2800.00 against my husband's 401k for the sole purpose of paying cash for an inexpensive car and registering it so that I can get to work. Is it okay to go ahead and purchase the vehicle for cash before the discharge? We won't get a discharge until the end of January, and we really NEED a car NOW. Will this hurt our case? We are pro se, and everything has gone well up to this point. We just need a car...

Thank You,
Lori
(We are in Colorado)
Hello,

Thank you for your question.

If you have already withdrawn the money from your 401(k) plan, you have already converted exempt assets to nonexempt assets. Although it would've been a more conservative approach to wait until after you receive your discharge, you can use the loan proceeds to purchase a vehicle without further risk to money
Customer: replied 7 years ago.

Before, I accept, I wanted to make sure I understand what you're saying. My question is also about hurting my case. You said we will not be at FURTHER risk...Does that mean that we did something wrong by taking a loan against the money? We haven't spent it and can put it back if we need to. We are just in desperate need of a car and don't know what else to do. We don't want to take out ANY loans right now, and this was our only option for getting a cheap car.... Can they take the car away if we buy it outright??

 

Thanks,

Lori

The bankruptcy court looks at the assets as they exist on the date the petition is filed. Therefore if your exemption for your 401(k) was accepted by the court, the fact that you have withdrawn the money from the 401(k) now will not have an impact on your case.
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