401k and Chaper 7

[LRGORANGE]

Is your 401K protected from being used to pay creditors in Chapter 7?

[HHM]

Typically, Yes, but you still have to list it as an Asset.

[LRGORANGE]

Thanks HHM, can you tell me how they deal with loans through the employer against the 401k? Can they be reaffirmed and continued to be paid back?

[HHM]

Ahh, that is an entirely different can of worms.

I am assuming you took out a loan against your 401K, right? If so, they are not treated as loans at all (because its your own money), they view that income as disposable.

[LRGORANGE]

What if the loan was taken 2 years ago, and the money is gone, how would they count that? I am confused about what they would do in that case.

[HHM]

The money you are using to payback the loan is considered disposible income. If you are not paying it back, and have already incurred the tax penalty, then the tax penalty is just another debt.