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Bankruptcy: Will it Affect My 401k?

On Behalf of | Jun 14, 2023 | Bankruptcy

Bankruptcy is a big decision that can have long-lasting repercussions on your financial future, especially your retirement savings. One important question that often comes up is whether your 401k will be affected by bankruptcy.

Bankruptcy Chapters

Knowing the difference between Chapter 7 and Chapter 13 bankruptcy is crucial when it comes to understanding how your 401k will be affected. In Chapter 7 bankruptcy, most of your assets are liquidated and used to pay off creditors. However, certain assets, including your 401k plan, are exempt from this process and will likely be protected.

In Chapter 13 bankruptcy, you will need to repay your debts over a period of 3-5years instead of liquidating your assets. During this time, you will still need to contribute to your 401k, but any withdrawals you make may be used to pay off your debts. It’s important to carefully consider the implications of filing for Chapter 13 bankruptcy before deciding.

Borrowing Against Your 401k

If you have taken out a loan from your 401k, you will still need to repay it regardless of whether you file for bankruptcy. Consider other options if you’re struggling to make payments before filing for bankruptcy. It’s also worth noting that while your 401k is generally protected during bankruptcy, other retirement accounts, such as traditional and Roth IRAs, have lower protection limits.


Filing for bankruptcy cansignificantly impact your credit score and negatively affect your ability to save for retirement in the future. It’s crucial to work with a reputable bankruptcy attorney who can guide you through the process and minimize the effect on your retirement savings.

Seek Legal Counsel

Bankruptcy is a complex process, and it’s important to understand its potential impact on your retirement savings. Although your 401k is protected during bankruptcy, you must still weigh the consequences of filing for bankruptcy. Enlisting the help of an experienced bankruptcy attorney can help you make informed decisions and secure your financial future.

For more information, contact the firm at 813-222-8210 to schedule a free consultation with an experienced attorney.