When you file a bankruptcy an estate is created and a trustee is appointed. Everything you own and everything you owe becomes property of the bankruptcy estate. Then Federal or State exemptions tell the trustee what can't be administered through the bankruptcy process. You must claim an exemption to receive the benefit it provides.
A 401(k) is exempt except for possibly any contributions made within 120 days prior to filing your bankruptcy. Normal regular contributions are probably fine but if the trustee sees an abnormal amount dumped into your 401(k), he has the power to undue the transaction and take the money for the benefit of your creditors.
Exemptions aren't automatic so remember that you must claim the exemption or the entire amount of your 401(k) may be in jeopardy.
Answers & Comments
Verified answer
Yes it can -- if things aren't done correctly.
When you file a bankruptcy an estate is created and a trustee is appointed. Everything you own and everything you owe becomes property of the bankruptcy estate. Then Federal or State exemptions tell the trustee what can't be administered through the bankruptcy process. You must claim an exemption to receive the benefit it provides.
A 401(k) is exempt except for possibly any contributions made within 120 days prior to filing your bankruptcy. Normal regular contributions are probably fine but if the trustee sees an abnormal amount dumped into your 401(k), he has the power to undue the transaction and take the money for the benefit of your creditors.
Exemptions aren't automatic so remember that you must claim the exemption or the entire amount of your 401(k) may be in jeopardy.
________
It's fully protected. One of the beauties of the 401k
You might not be able to put in contributions if you are doing a chap 13.
Here is an excellent answer from 3 years ago, and the laws
http://answers.yahoo.com/question/index?qid=200911...
Warning: This will be reviewed carefully.
Do not start maxing out your 401K today at $17,500 and then file 9 months down the road.
This would be fraud.
^ I read your other question, and I had to add this.
Anything you do, will be examined.
Do not try to hide money in any way. Since it will just be found. They will dig.
Another example is paying down your mortgage. Know that the home is not protected.