If you are like most people, your 401k or other retirement account is one of the most significant assets you own. Thus, you are probably concerned with what will happen to this savings when you file a Chapter 13 bankruptcy. There is no easy answer since the answer can differ depending on a variety of factors, including the jurisdiction where your case is filed.
A Chapter 13 debtor must pay a portion of his/her income toward paying creditors under a repayment plan. You plan lasts for a period of three to five years. During this time, a trustee supervises your case and makes sure creditors are paid according to the terms of your plan. While a qualifying retirement account is protected from creditors by exemptions, the issue arises of whether you can make contributions to your 401k while your Chapter 13 case is pending.
It is common for individuals to make contributions to a retirement account through direct deductions from their paycheck. Some courts require a debtor to stop making these contributions and use the funds to repay their debt in the bankruptcy case. Other courts allow the debtor to continue making contributions to their retirement account. Thus, it is essential that you confer with a local Chapter 13 attorney to determine how your court is likely to handle this matter in your case.
The matter can be even more complex if you have taken a loan against your 401k. In this situation, the Chapter 13 trustee is likely to allow you to continue making the loan payments under your Chapter 13 plan.
If you are considering filing a Chapter 13 case and you have questions regarding your retirement account, contact DeLadurantey Law Office to schedule an appointment.
At DeLadurantey Law Office, LLC, we help businesses and families find their way out of highly difficult financial situations. We provide the advice and guidance you need in obtaining debt relief through bankruptcy and debt negotiations. We can also assist you in student loan law and defending a foreclosure action. Contact us at 414-377-0518 to discuss how our Milwaukee bankruptcy attorneys can assist you. Like us on Facebook.