Understanding your 401k and bankruptcy law is critical before you file. Bankruptcy laws do protect employer sponsored retirement accounts, including the 401k. This means that creditors are unable to come after these retirement funds. It also means that your retirement account is protected from seizure by the bankruptcy attorney to repay creditors. Still, there are several things you should realize.
If you are filing bankruptcy, it is always a good idea to hire an attorney to help you through the process. One of the things that an attorney can do for you is to help you to protect your assets, including your retirement accounts. Consider the following requirements for filing bankruptcy.
If you do own an IRA, your contributions are protected up to $1 million currently, though this amount may change every three years. If you have a 401k account, in general, those funds are fully protected. Other types of savings accounts, such as savings accounts, checking accounts and similar types have no protection even if you label them as for retirement. In these situations, the bankruptcy trustee can confiscate those funds unless they are protected by your exemptions.
It is important that you do not try to place excessive funds into this account for the purpose of hiding or protecting the funds from your creditors or the bankruptcy court. You also are unable to have any type of 401k loan discharged during bankruptcy.
If you are planning on filing bankruptcy, hire an attorney to legally represent you in a court of law. The attorney can help you to protect many of your assets, including your 401k and other retirement accounts.