Can I cash out 401k and have it exempt from chapter 13 creditors? 11 Answers as of September 17, 2014

I filed Chapter 13 bankruptcy on October 2012. I lost job July 2014. I need to cash out my 401k money to pay bankruptcy payments until I get a new job and house repair. I am aware of tax liabilities, etc.

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Stephens Gourley & Bywater | David A. Stephens
That depends on how large the amount is. Technically it keeps its exemption, but if it is a large sum, the trustee may ask for it to be turned over.
Answer Applies to: Nevada
Replied: 9/17/2014
Ronald K. Nims LLC | Ronald K. Nims
If you are taking money out of the 401(k) just to pay the creditors then since qualified plan money is exempt, there is no problem with the creditors taking the money. You should definitely calculate what the taxes on the 401(k) distribution are and take out enough to cover your taxes. I'd recommend that you pay the tax money immediately using IRS Form 1040-ES as well as any state tax.
Answer Applies to: Ohio
Replied: 9/17/2014
Meister & McCracken Law Firm, PLLC | Joanne M. McCracken
Save your 401K and convert to a Chapter 7. Talk to your attorney about this. If it is at all possible, never liquidate your 401K, which is an exempt asset, to pay debts. Between the penalties and the tax consequences, that is the worst option.
Answer Applies to: Arkansas
Replied: 9/17/2014
Deborah F Bowinski, Attorney & Counselor at Law | Debby Bowinski
You should speak to your lawyer. In some cases, it may be possible to try to modify a confirmed chapter 13 plan where there has been a loss of income. As to the retirement money, that may be handled differently from one jurisdiction to the next, so your lawyer is the best person to answer that for you.
Answer Applies to: Colorado
Replied: 9/16/2014
The Law Office of Darren Aronow, PC
The Law Office of Darren Aronow, PC | Darren Aronow
You have to ask permission from the trustee in order to cash out your 401k, you are not allowed to create more debt which is what you are doing in the form of tax liability.
Answer Applies to: New York
Replied: 9/16/2014
    D.J. Rausa, Attorney at Law | D.J. Rausa
    You do not need permission from the bankruptcy court to liquidate your 401k.
    Answer Applies to: California
    Replied: 9/16/2014
    A Fresh Start
    A Fresh Start | Dorothy G Bunce
    I think you can do this if your bankruptcy plan says that upon confirmation all of your property vests back to you, which is not the same thing as saying I think you should do this. You may have better options, such as converting your Chapter 13 to a Chapter 7.
    Answer Applies to: Nevada
    Replied: 9/16/2014
    Tokarska Law Center
    Tokarska Law Center | Kathryn U. Tokarska
    Probably, but before doing that it's best to explore other alternatives such as: getting an early discharge in chapter 13 based on a hardship or converting the chapter 13 to chapter 7 or reducing the plan payments by modifying the plan based on changed circumstances. Whether these are possible and the result depends on details about your case. It's important to contact your bankruptcy attorney as soon as there are significant changes to your income or expenses and you won't be able to keep up with regular Plan payments. Statistically speaking, success rates for self represented chapter 13 debtors are in the very low single digit percentage so I can't leave out the fact that it's better to have an attorney. If you don't have one consider retaining one to assist you now though it may prove a bit difficult to find one willing to jump on a horse that is already in motion. Getting involved in an existing case could mean more work than usual for less than usual but hopefully you can find a caring soul who wants to help.
    Answer Applies to: California
    Replied: 9/16/2014
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    They are exempt funds, you can do this. Have you looked at converting to chapter 7?
    Answer Applies to: California
    Replied: 9/16/2014
    Danville Law Group | Scott Jordan
    DON'T DO THAT! If you lost your job and have no income, why not convert your 13 to a 7 and get your discharge quicker?
    Answer Applies to: California
    Replied: 9/16/2014
    GARCIA & GONZALES, P.C.
    GARCIA & GONZALES, P.C. | Richard N. Gonzales
    Under these circumstances, you will be fine. Ask your Chapter 13 lawyer for his or her advice.
    Answer Applies to: Colorado
    Replied: 9/16/2014
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