Is My 403b Account Protected In Bankruptcy?
Is My 403b Account Protected In Bankruptcy
Short Answer: Yes.
Much like a 401k plan, 403b retirement plans are protected in bankruptcy. If you are an employee of a state or county school, or a non-profit, you may have your retirement funds in a 403b retirement plan. While these funds do need to be disclosed upon filing bankruptcy, the bankruptcy trustee will acknowledge the bankruptcy exemption protecting those funds.
What If I Withdraw 403b Funds Prior To Bankruptcy?
If you take money out of a 401k or 403b account prior to bankruptcy, you should be aware that you will probably have tax consequences for early withdrawal. In terms of your bankruptcy, you should disclose those withdrawals to your bankruptcy attorney. Typically, those withdrawals will be treated as income for the purposes of passing The Means Test in bankruptcy. While this may sound unfair, this treatment is only for bankruptcy filing purposes, and usually will not upset the results of your Means Test. The Means Test helps to answer the question Can I File Bankruptcy?
Do 403b Loans Survive Bankruptcy?
If you have a loan against your 403b retirement funds, that loan will be treated as a secured loan for the purpose of your bankruptcy filing . In a Chapter 7 filing, the loan will survive the filing. In a Chapter 13 filing, the same result occurs; however, you will typically continue to pay on the retirement loan during your Chapter 13 repayment plan. This will help to reduce the balance and maybe even pay it off during the course of your Chapter 13 bankruptcy.
Speak With A Charlotte Bankruptcy Attorney Today
If you have questions about filing bankruptcy, we’re here to help. Case evaluations and consultations can be conducted by phone and are free of charge. You can call us at 704.749.7747 or click for a FREE CASE EVALUATION and we will reach out to you today. We know you have choices. We hope you choose to Recover With Us.