It is a common question that people will ask when they are considering bankruptcy.
Is my 401(k) retirement safe?
The answer is very simple, and should come as a relief for those who are under a tremendous financial strain and need a fresh start. Your 401(k) is safe and secure when you file bankruptcy.
But there is an important fact to remember when you are considering filing for either a Chapter 7 or Chapter 13 bankruptcy that applies to your retirement account. The money is protected, as long as it stays in the 401(k) or similar IRS-approved retirement account.
Taking the money out of the 401(k) or any retirement account prior to filing will change that money from a protected status to an unprotected asset. That’s why it is a good idea to always consult your attorney at Steidl and Steinberg before withdrawing money from your 401(k) and putting it in a regular bank account. While you can protect a certain amount of assets through the bankruptcy exemptions, leaving the money in the 401(k) is the safest and best route.
Funds in checking account, savings account and non-retirement investment accounts do not receive the same protected afforded to retirement accounts. Before you make any financial decisions that could have an impact on a bankruptcy filing, consult an attorney at Steidl and Steinberg.