Legal Question in Bankruptcy in Missouri
My wife and I filed chapter 13 bankruptcy last year. Our lawyer knew I was planning to reduce hours to go to school and this year we are making significantly less and tuition is high. Can I leave my job completely and cash out part of my 401K to make up the difference in income to pay for school and expenses while in school?
1 Answer from Attorneys
People usually file a chapter 13 either because they make too much money to qualify for a Chapter 7 filing or because they have too much property; i.e, they would lose their property if they filed a Chapter 7. A Chapter 13 requires regular income, and the definition of regular income is somewhat expansive, but, in general, funds acquired as a result of liquidating property that would have been exempt in a Chapter 7 aren't really income. If you filed a Chapter 13 only because you made too much money, then it may be possible to convert the Chapter 13 to a 7. It may also be possible to modify the payment in a Chapter 13. The question isn't so much "Can I ...", but rather, the question is "How will this affect my bankruptcy chapter eligibility and payment amount if I'm in a 13?" Since these are very fact-dependent questions and since I don't have the particulars, I'm giving you general information.
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