Chapter 13 bankruptcy. Can an employee still contribute to the plan as well as make loan payments?

[Guest Cookiemonster]

A participant in a 401(k) plan is filing Chapter 13. He wants to know if he is still able to contribute to the plan. He also wants to know if he must still pay back his 401(k) loan.

He is still an active employee at the company and is still getting paid the same as before. Let me know your thoughts

[QDROphile]

You should not be advising him about bankruptcy issues. He should ask his lawyer.

[Guest jashendo]

Cookiemonster --

As QDROphile said, the participant should consult with his lawyer concerning the effects of continuing to contribute. So far as the loan is concerned (assuming that it is payroll-deduction), the company should consult with its lawyer as to whether it can continue to withhold payments from the participant's salary. If the participant does not repay the loan, for whatever reason, he will be taxable (even if the loan is dischargeable).

[Harwood]

A loan from a Qualified plan can never be dischargeable.

A judge can stop the loan repayments; the loan will be deemed and taxed.

But no [bankruptcy] judge can mess with plan assets and make them go away.