While in chapter 13 can I cash out a 401k ?
3 attorney answers
Don't!!!!!!!!!!!!!!!!!!! If you are not at least 59.5 years old, the Feds will take about half in taxes and penalties. Moreover, you will be converting an exempt asset into a non-exempt asset. PLEASE discuss with your attorney BEFORE doing anything. Good luck.
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Listen to my colleague Dorothy.
The issue is not so much "can" you but "should" you. Unless you are at retirement age, withdrawing from the 401(k), either inside or outside BK is a bad idea. Where I practice we don't usually need to seek trustee permission, but the problem is the potential tax liability. If you will need to pay tax next year when you do your taxes, that may blow-up your plan. The other issue is that it creates income. In districts where the trustee monitors tax returns, the 401(k) withdrawal will usually put you over the allowed percent increase and trigger a review of your case. You don't want that.
Whatever it is you think you need the money for, either find another way or seriously reconsider the "perceived" need.