Kansas City, MO asked in Bankruptcy for Kansas

Q: I took a loan on 401K and am paying it back out of check. What happens in chap 7?

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2 Lawyer Answers

David Adams

  • Bankruptcy Lawyer
  • Olathe, KS
  • Licensed in Kansas

A: A 401(k) and a 401(k) loan are really not affected by a ch 7 bankruptcy. The funds are exempt and not subject to being lost to the bankruptcy court, and the loan is secured and not really affected by the bankruptcy either, as any failure to pay would still allow the retirement funds to be offset to pay off the loan.

Timothy Denison

  • Bankruptcy Lawyer
  • Louisville, KY

A: Nothing 401k proceeds are exempt.

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