401K???is it exempt??

[bkadv]

So back to this 401k withdrawal. if the 401 amount is listed in your bk and fully disclosed does that not make it exempt? Just wondering if anyone has any background on this subject.

[Minnymouth]

Just because the 401 is listed on your bk does not mean its exempt. Some retirement programs are not exempt!!!

Some 401's are handled differently in BK.... some you can't pay back a loan against it during bankruptcy.... (insider - paying yourself)...

Some as long as its in the retirement program it is exempt.... the minute its drawn out it becomes an asset (cash on hand)....

So its best not to do ANYTHING with a 401 during the BK process...........

You sure don't want to draw it out after filing BK and rub it in the Trustee's face.......... he could very well seize it....

[dweebolina]

A 401K retirement is exempt under the new BK laws (in Nebraska) but for your own sake do not touch it until your case is closed!!! We withdrew one month prior to filing (our attorney did not know until after the fact) and we are thinking we are pretty much screwed, regardless of what we used it for. You don't want to chance it!!!!

[bkadv]

Thanks, everyone seems to have different opinions on whether it's safe and we can't get a straight answer from our attorney.

[possumfat]

Information on 401K's in bankruptcy:

http://www.moranlaw.net/pensions.htm

[BassBoy]

Good link. Quick and to the point. "not property of the estate: the debtor doesn't even have to exempt them in bankruptcy. If an assets is not property of the estate, the trustee can't cash it in for the benefit of creditors" is my understanding and my sources tell me that after discharge, you can draw from a 401K.

I guess the million dollar question is, has anyone ever drawn from a 401K, and then had the trustee come after it?

[bkadv]

I liked this site, but am still hesitant. We could really use the money since the courts are taking our tax return. Have two small children, and I'm not back to work yet. Hubby works but one income is tough.

[bkadv]

Thanks Scammer. I love the input here also, but get freaked out by some of the posts, then I'm not sure who to believe.

[Minnymouth]

ONLY A ATTORNEY can tell you for sure that your pension plan is exempt.... most 401k's are. Others may not be!!

If you have private pension or retirement plan, the Trustee may not be able to seize your pension plan, but he can stop you from paying anything else into it if he can put you into a Chapter 13 and use that payment to your pension plan for your creditors. You will not be allowed to pay yourself.... instead of the creditors. You will not be allowed to pay into a Roth or IRA instead of paying your creditors in a Chapter 13. A Chapter 13 is based on what disposable income you have, not what you want to give them and then set aside the rest for yourself.

[Minnymouth]

Bassboy,
The question of whether anyone has withdrawn from a 401K and had the Trustee go after it????

Most attorneys will advise you not to do ANYTHING during the bk process..... to rock the boat. I wanted to draw some of my 401k to re-buy my home back and attorney said "absolutely not"........before discharge. After discharge, yes, I could do whatever I wanted with it. Fortunately, I was discharged long before my home auctioned.

I will do some research on the subject and see if I can find a case where someone withdrew from their 401K between filing and discharge and the Trustee had knowledge of it and see what happened.

May take me a day or two research.

Minny

[bkadv]

In my case discharge was on 12/22/05. We filed under old laws in September.
Case won't be closed until they take our tax return. IF they'd not taken our tax return we would have been fine, thus we now need to use other resources. Thanks for any info!