
How Will Bankruptcy Affect My Retirement Accounts?
How Bankruptcy Affects Your 401k, IRA and Other Retirement Accounts
If you are considering bankruptcy, you may be wondering how it would affect your retirement accounts. Will your accounts be liquidated to pay creditors? Will you be able to preserve any portion of your retirement savings? Should you drain your 401k to pay down debt rather than file bankruptcy?
At RHM LAW LLP , we will answer all your bankruptcy-related questions, giving you the necessary information to make a sound decision about whether bankruptcy is the right solution for you. For legal advice tailored to your specific situation, call our firm at (213) 344-0043 to arrange a free consultation.
Can Creditors Touch My Retirement & 401K Funds?
Most of your retirement funds such as 401ks and other qualified retirement accounts are protected from creditors and untouchable by a bankruptcy trustee. Since these funds are protected by federal bankruptcy laws, it is rarely a good idea to cash in your retirement accounts to pay off your debts.
In a Chapter 7 bankruptcy, most retirement accounts are classified as exemptions under the Bankruptcy Code. That means these accounts cannot be liquidated to pay your creditors. Under Chapter 13 bankruptcy, none of your assets are taken from you. The monthly repayment plan amount is determined by your income. Your retirement savings are only included in this amount if you want them to be.
Should I Borrow From My 401k to Pay Debts?
No! Before you needlessly drain your 401k or other retirement account to pay down debt, speak with our bankruptcy attorneys. Since retirement accounts are protected under federal bankruptcy law, you may be better off filing bankruptcy and preserving your retirement funds.
You should avoid touching your 401k if you are in debt for the following reasons:
- If you cash out your 401k, you could face steep penalties for early withdrawal and could be making your debt worse.
- If you transfer your 401k funds into another account, these funds will lose their retirement fund exemption status and will be accessible by creditors.
- Transferring funds into your 401k shortly before bankruptcy can also raise red flags with the bankruptcy trustee, who may think you are attempting to commit fraud by shielding assets from bankruptcy.
Your retirement savings represents years of hard work and sacrifice. Losing this nest egg is a major concern. Get the facts from bankruptcy lawyers who have your best interests in mind.
Southern California Bankruptcy law Firm
Do not let fears about losing your retirement accounts stop you from getting the debt relief you deserve. Count on RHM LAW LLP for trusted bankruptcy assistance. We welcome the chance to meet with you and evaluate your financial situation.
Contact our firm to schedule a free consultation today. We maintain offices in Los Angeles and Encino. Payment plans are available.
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We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

RHM LAW LLP
Meet Our Los Angeles Bankruptcy Specialists
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M. Jonathan Hayes Senior Counsel
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Matt D. Resnik | Managing Partner Certified Bankruptcy Specialist
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Roksana D. Moradi-Brovia | Partner Certified Bankruptcy Specialist
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W. Sloan Youkstetter | Associate Attorney Certified Bankruptcy Specialist
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Russell J. Stong III | Associate Attorney Certified Bankruptcy Specialist
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David M. Kritzer Associate Attorney

Client Reviews
What Clients Say About Working With Us
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I filed bankruptcy with this firm 3 years ago and found that they are professional, friendly, and compassionate. I also met with their loan modification department. Unfortunately, they were unable to help because of the type of loan that I have. I really appreciated that they did not lie, waste my time, or take my money in an attempt to modify a loan that was not doable. I've since used their firm for a couple of minor issues and found all of the attorneys to be knowledgeable and considerate. Attorneys Simon and Resnik are amazing!- Shannon J.
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I needed a bankruptcy attorney in Sherman Oaks and found Matt Resnik on Google. He has one of the best-reviewed bankruptcy law firms on Yelp so I decided to check it out his law firm for myself. I quickly found out that they are foreclosure specialists and they could help me with my issue. They made the process very easy for me and laid out my options for me. I cannot thank them enough for helping save my home. I would recommend them for anyone that is thinking about filing for bankruptcy or foreclosure on their home. They are the best bankruptcy law firm in Sherman Oaks.- Joseph R.
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Fantastic office! I want to thank Matt for taking his time with me and sincere in his assistance. He spent over an hour with me for free during our initial consult. I left knowing exactly what's needed. He not only saved my house but also got rid of all my debt. They are not your typical attorneys and their creativity really allowed me to do things that other attorneys never mentioned in previous consults. Affordable and Outstanding firm and thank you for all you have done! My family thanks you!- David K.
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Was very impressed with the comprehensive professionalism of the firm, especially Matthew Resnik... I had suffered through the incompetence of two previous bk lawyers not to mention fees far greater than anticipated, without resolution. Having never gone through bk before, I did not realize how difficult it could be...then, my case was turned over to Mr. Resnik...almost immediately there was a marked positive difference. Where there was little to no communication, all of a sudden I am getting updates...regularly. Further, my case was finally discharged...yet, Mr. Resnik continues to communicate, offer assistance...and, has NEVER asked for additional fees, which I am sure he could have justified...much unlike the two previous attorneys with which I was dealing. I have no reservations, whatsoever, referring and recommending Matthew Resnik for any and all business or personal bk issues...or, other wise. I have no doubt that he will be transparent on helping you regardless of the problem. Good guy.. good firm... a wonderful experience!
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Dear Mr. Resnik: We wanted to thank you for your professional handling of our loan modification with GMAC mortgage. We are very happy that you were able to accomplish the modification of our loan in such a short period of time. Thank you again for your professional service.
- W and B Mejia -
I worked with Matt and his team for about a year to get through the paperwork shuffle and my personal experience was nothing short of fantastic. Legal situations have a tendency to get hairy, but Matt and his staff conducted themselves with professionalism throughout the whole ordeal. To keep it short, let's just say he under-promised and over-delivered. Rarely would I ever say this about an attorney, but overall he was just a great guy. I would not hesitate to have him on my side of the courtroom again. World market is right across the street from his office and I even decided to get his staff a thank you / holiday gift card. World market has excellent craft beer BTW, try the Einstock White Ale. They also validate parking. That just shows this isn't a fake review.- Dean C.
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Where to begin? I had a vile evil credit union repo my car over a misunderstanding, they wouldn't work with me even when I offered full payment plus repo fees (this was my first repo!) so I didn't know what to do. I met with a few lawyers but when I met with Simon he broke things down and gave me my options. I needed a car - so I filed BK and included the car to get it back. The evil credit union fought and Simon GOT ME MY CAR BACK!!! His team is amazing!!!! Maria Donna etc!!! These are top-notch pros that'll have your back. I cannot recommend them highly enough. Sincerely they saved my life. LA with no car!? ARGH!!!!!! *THANX ALL!!!!- Tim C.
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Thank you for your great work on behalf of Ms. Johnson. Without the support of pro bono attorneys we couldn't do all the work we need to do, and your firm in particular is outstanding.
- Skip K. -
Matt and his team are the best!! They were thorough, extremely knowledgeable, wonderful to deal with, thoughtful, and really helped guide me through what was one of the toughest times in my life. I never felt judged or looked down on. They were efficient and really were lifesavers during this tough time. I can not recommend them highly enough!!!!- Rusty H.

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A Summary of Bankruptcy Law: Third Edition
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Summary of Chapter 13