So I had to file an Emer-7. I PASS the means test. I regularly have 401(k) loan paycheck repays deducted. What I would like to know with some clarity is whether or not these loans should indeed be listed on Schedule "D" or just "I". I did not use this expense on the means test as I know I cannot for a 7. As this will be an undischargeable ongoing expense, I thus far have only listed it on Schedule "I". I can't see a forced 13 plan because current payments won't end before a 13 plan could end; there's no income to free up & there is near 0-Disp. Inc left monthly now... so no chg w/ a plan. I've heard that in a 7 it goes on Sch."I" alone & in 13 it goes on both schd's because only under 13 is the debt recognized as a legit/listable "secured" debt. So if I may ask... which is it in this area?
To elaborate further, given the CH7 vs. CH13 scenario with respects to 401(k) loan repayment expenses - since I am not filing a 13 - layperson research seems to indicate that listing the same on Schedule D may be ill-advised since this type of obligation is ignored in a CH7, so again, while I presently only have it listed on "I" - I'm wondering if I'm really supposed to also list this on "D". I wouldn't want to upset the Trustee or Judge listing something that I shouldn't be and wind up angering them over it. I very much appreciate the insight!
Chapter 7 Bankruptcy Attorney
I'm not sure about the practice in Chicago or what the trustees there expect to see. In Detroit, we generally do not include 401(k) loans as debt in schedules D, E, or F. The "creditor" after all, is you.
I personally include the 401(k) loan repayment as a deduction from income in Schedule "I" whether I am doing a Chapter 7 or a Chapter 13. I am not certain this is strictly permissible, but I have not yet drawn an objection in five years of practice (I'm knocking on wood right now).
The 401k loan should not be listed on Schedule D. As the prior answer indicated, you are the creditor since you are paying yourself back.
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Chapter 7 Bankruptcy Attorney
That is a great question. Our office has never put the 401(k) loans or any pension loans on the Schedule D. However, we often are required to turn over the loan documentation to the trustee. This serves 2 purposes, first to verify the loan and second to verify how long it will take to pay off the loan. If the loan is paid in full at some point during the plan, the trustee may require that the plan payments increase because that loan satisfaction will mean there is more disposable income to pay towards your creditors.