The Effects that Filing Bankruptcy Can Have on Your 401k
Sometimes things don't work out the way we've planned. Many people are finding out the hard way that even if you work an honest living, outside variables such as the economy can bring you to your economic knees without warning. If you've been fortunate enough to establish your 401k through an employer so you can fund your retirement years then you'll not want anything unfortunate to happen to your investment. However, if the unthinkable happens & you find yourself in the throes of a bankruptcy filing then what happens to your 401k?
Your 401k if You File Bankruptcy
You probably always related bankruptcy with financially reckless & irresponsible individuals and have never related yourself with them, but that isn't always the case. In fact, 1 out of five homeowners own more on their home loans than their home is worth. A lot of these homeowners are hardworking 401k owners just like you & now find themselves in the unfortunate situation of having to file bankruptcy. But what happens to your 401k? Fortunately, you are allowed to make some of your possessions exempt from the bankruptcy & your 401k can be one of those exemptions under Chapter 7 bankruptcy. There are limits as to how much you can exempt but it's probable your 401k is protected at a high enough amount to not matter.
Your 401k if Your Employer Files Bankruptcy
Yes, companies can and do file bankruptcy just like individuals can. If your employer does file bankruptcy then your 401k could be at jeopardy. If your employer files Chapter eleven bankruptcy then they will remain in business while trying to correct their finances. Chances are your 401k and health plan is safe in this situation but you should still check with your plan administrator or union representative to be positive.
On the other hand, if your company files Chapter seven bankruptcy then all their possessions are to be placed on the hacking block and that might consist of your 401k. There is a possibility that you'll still be paid the value of your 401k before it is terminated but that isn't necessarily the case. Again, familiarize yourself with your plan and talk to a union rep or administrator to learn the details of your company's bankruptcy.
Learn More About Bankruptcy and Your 401k Today
It mightn't seem fair but you can live a financially responsible lifestyle with your 401k only to see it go up in smoke because your employer made some poor economic decisions. However, every case is different and you'll want to talk to a licensed bankruptcy lawyer right away if you hear about your company filing bankruptcy because there could be a way you can save your retirement funding from kicking the canister. & if it's you that's filing bankruptcy then be absolutely positive you're listing your 401k as an exemption so you can keep what is rightfully yours: a funded retirement.
Related Links:
