Tag Archive for: 401k

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.

Yes. There are exceptions, but generally speaking your retirement funds are protected from creditors in a bankruptcy. This is why it’s so important to take action and consider bankruptcy before depleting retirement accounts to manage bills. A Charlotte bankruptcy attorney can assist in determining whether your funds are protected, but here are some general rules:

The Law

The Supreme Court has found that the anti-alienation clause protects your retirement accounts from creditors. What this means is that your retirement funds are not included in your bankruptcy estate so it is outside the reach of creditors and the bankruptcy trustee.

Qualified Plans

Provided the funds are held in a qualified plan under the federal pension savings act and have not been transferred into that account for the purpose of avoiding creditors, you will be able to protect them even when filing bankruptcy.


I represent a lot of clients who have their own businesses and do not contribute to employer 401k plans. Instead, they often have IRA contributions they need to protect.

IRAs represent a different type of retirement vehicle, owned by individuals. These are protected up to $1 million. Unfortunately, savings and checking accounts are not protected as retirement funds even if you label them as such or intend to use them for retirement purposes. There are exemptions in bankruptcy, however, which can be used to protect money in these accounts.

401k Loans

Lastly, it is not uncommon to have a 401k loan in place when filing bankruptcy. These loans are not dischargable in the bankruptcy but together with back taxes and other similar debt, they will not prevent you from a successful filing.

Call today to speak with me regarding your options—you’ll feel better knowing your rights and I’m happy to have the conversation. 704.749.7747.