Can I Keep My 401k if I File Bankruptcy?
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When you file a chapter 7 bankruptcy, one of the most important things you will do is complete Schedule C which lists your bankruptcy exemptions. Exemptions allow you to keep certain personal property away from your creditors. There are federal exemptions and state exemptions, some states allow you to choose which list of exemptions you want to use.
In those bankruptcy exemptions there is a Pensions exemption which will include any 401k, IRA, Roth IRA, company pension, public retirement benefits such as SSA, and other retirement benefits. For example, you can see in the California Bankruptcy Exemption list the following exemptions:
Pensions
11 U.S.C. § 522 – Tax exempt retirement accounts. Traditional and Roth IRAs up to $1,095,000 per person.
704.110 – Public retirement benefits.
704.115 – Private retirements benefits, including IRA and Keogh.
Government 21255 – Public employees.
Government 31452 – County employees.
Government 31913 – County peace officers.
Government 32210 – County fire fighters.
So, yes you can keep your 401k when you file bankruptcy. If you have loans against your 401k, or are considering taking a loan against your 401k you should discuss your situation with a bankruptcy attorney because the money you receive from a 401k loan could be considered part of the bankruptcy estate and subject to being used to pay your creditors.
