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Is My 401k Safe in Bankruptcy?


Many people are afraid to file for bankruptcy protection because they do not want to lose assets, such as their retirement account. Filing a Chapter 7 or Chapter 13 case is the most comprehensive means for dealing with your debt, but it is important to understand that the law provides exemptions for several of your most valuable assets. An exempt asset is one that the law protects and removes from being included in your bankruptcy estate. The purpose of allowing a debtor to exempt certain assets is to help ensure the debtor obtains a “fresh financial start” at the end of his or her case.

Your retirement funds are often one of your most significant assets. The law recognizes the need for a debtor to keep these funThe federal exemptions and most state exemptions protect qualified 401k accounts, Individual Retirement Accounts (IRAs), pensions and other forms of retirement accounts.

The law sets a cap on the amount of funds that are exempt in IRAs, but it is well over a million dollars. Thus, for most debtors, their accounts are below the cap and fully protected. However, if your IRA exceeds the amount of the cap, you should consult with a seasoned bankruptcy attorney to discuss your options.

In fact, before you file a personal bankruptcy, you should discuss how the filing will impact all of your retirement accounts. This is particularly true if you have a loan against your 401k or other matters which can add complexity to your filing.

Claiming all applicable exemptions is essential to protecting your assets and ensuring your bankruptcy case is successful. You should ask your bankruptcy attorney which exemptions you can claim and to what extent they will protect your property.

Contact the Orange, Riverside and Alameda law firm of Fitzgerald & Campbell, California’s premier debtor protection law firm. We can work with you to create a debtor protection plan and can work to halt harassment and reduce and eliminate debt. Contact us for a consultation by calling (844) 431-3851 or emailing us at

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