What happens to your 401 K when you file?

[marcie26]

My husband asked me this and of course I have no idea as we haven't gone to an attorney yet - I have to actually "schedule" a time to even call to schedule an appointment because I have two babies that demand all my time plus an almost full time job - well, anyway, I was hoping someone could help me out and tell me about their experiences? Thanks!

[DivorceRuinedMe]

401K is protected. Hope this eases your mind.

[marcie26]

401K is protected. Hope this eases your mind.

Really? That is a relief for my husband - he has worked at his job about 10 years now.

Anyone know about savings accounts for our kids? We have savings for them (not more than a $100 or so) and I also have some money market accounts - do I take that money out or let it go towards my debt? (they are about 2-3,000 dollars, I am not even sure, but not a whole lot)
Sorry for all the questions!

[keepmine]

As DRM stated, ERISA qualified accounts up to $1 million are exempt in bk proceedings.
As to the question of cash, that will have to be determined by the amount your state exempts. If above the exemption level, spend it on necessary living expenses prior to filing. Stock up on food and personal products, get necessary car and home repairs, dental work you've avoided, eye exams and glasses,etc.

[marcie26]

As DRM stated, ERISA qualified accounts up to $1 million are exempt in bk proceedings.
As to the question of cash, that will have to be determined by the amount your state exempts. If above the exemption level, spend it on necessary living expenses prior to filing. Stock up on food and personal products, get necessary car and home repairs, dental work you've avoided, eye exams and glasses,etc.

Thanks, right now we are trying to finish up on the home repairs and I am in desperate need of new glasses.

[uptomyeyeballs]

ok seeing a 401k is protected.say you file bk how long would the 401k have to be left there before you could cash it out once the bk is over? In other words I guess it be where they couldnt take it from you if doing a chapter7.Also could it be used for anything you wanted?

[keepmine]

ok seeing a 401k is protected.say you file bk how long would the 401k have to be left there before you could cash it out once the bk is over? In other words I guess it be where they couldnt take it from you if doing a chapter7.Also could it be used for anything you wanted?

Once the bk is discharged, you can do anything you please.
Would not cash out a 401K just to pay living expenses. If you can't cover day too day expenses, your problem is not debt but, lack of income and that is what needs to be addressed before you file.

[Phillymanhere]

Just to chime in: definitely do not even think about cashing in a 401K.
It's a fantasy, as far as I'm concerned, to think you'll pay it back to yourself later. In fact, it's the same kind of fantasy (of the big score soon coming up, etc.) that got many of us into the position we're in today.

Also, you will pay an immediate 10 percent penalty for cashing out a 401K. That is, you will have to pay to the IRS 10 percent of what you withdraw. Plus, the entire amount you withdraw is now subject to income tax. Therefore an early withdrawal from a 401K or an IRA for that matter, really results in your losing a huge percentage of your money. You withdraw 100 percent to get like 60 percent.

My thinking is that if you really feel like you need to withdraw from a 401K that's a sign that you need to rethink your spending elsewhere. None of us is getting any younger.
It's really not worth it.

Good luck.