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What Happens to a 401k in Bankruptcy

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  • 04-16-2009, 08:24 AM
    MIrider
    What Happens to a 401k in Bankruptcy
    My question involves bankruptcy in the state of: Michigan

    I have been unemployed for 6 months now, and I am having big problems with taking care of back bills. and I am considering chapter7 bankruptcy.

    I have a small 401K from my last employer (less than $3000).

    If I use the 401K money I know that I will be charged interest and penalties, but if I do not, during the bankruptcy, will I be required to liquidate it anyway, thus incurring the same interest and penalties?

    I am goint to file individually, as the bill involved are all initiated previous to my marriage. I was going to use whatever was left after the liquiditation to try to catch up on current obligations before they accumulate into another major problem.

    Thanks for you advice.
  • 04-18-2009, 06:29 PM
    Mr. Knowitall
    Re: What Happens to a 401k in Bankruptcy
    Most 401K plans that are subject to ERISA include non-alienation provisions that keep them outside of the estate in bankruptcy.
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