How much trouble am I in because of not knowing that I have a 401k account? 11 Answers as of February 25, 2014I filed chapter 13 in May of 2009. In July of 2011 I became disabled and had to leave my job. About a month later, I was told that I had a 401k account with that job and they asked me if I wanted to cash it in or roll it over. I didn't even know I had a 401k account. I cashed it in, because I needed the money for medical bills and living expenses as my state disability money had not started coming in yet. I was not trying to defraud anyone by not telling them about the account because I didn't know it existed. I have made every payment on time and I only owe 2 more payments to the court to fulfill my 60 month plan. What should I do??
Garner Law Office | Daniel Garner
You can always amend your schedule of assets to include the 401k, but the bigger problem is that you spent the money from the account instead of rolling it over. That is a taxable event, and it must be disclosed to the Chapter 13 trustee. It probably will hold up your discharge until you pay the entire amount to the trustee. The best person to help you would be the lawyer who filed your Chapter 13 case. You need to analyze how much debt remains from what you started with when you filed 5 years ago, and what your current income and assets look like. It may be possible to voluntarily dismiss your case and file a Chapter 7 to finish discharging the debt, but that would depend on your current financial situation. You can't just hope they won't find out, because that would be considered criminal concealment of assets and you could go to prison for that.
Answer Applies to: Oregon
David R. Fondren, Attorney at Law | David R. Fondren
You will be in trouble if you do nothing. If you correct the situation, the court will not penalize you for a honest mistake. Have your attorney prepare amended schedules B and C for you to sign to add the 401k. Copies will have to be sent to all creditors along with the Trustee. Everyone will have an opportunity to object to the claim of exemption. You will need to explain why you did not know you had a 401k. Do your pay stubs not show the deduction? This should have been discovered at minimum when you provided six months of pay stubs before filing. Do you not receive annual statements for tax purposes? Do you not receive periodic statements showing values, increases and decreases from the investment company? Did you employer not tell you of this employee benefit when you applied or was offered the job? Did HR never communicate about how much you can voluntarily withhold from your pay before your first paycheck and how much the matching contributions would be? Do you not recall signing a form to authorize the voluntary withdrawals and choosing your investment options? In other words, you will need to convince the court that you missed all of these communications and actions, that you were completely oblivious to the physical world around you. By the way, the amount you state should be the value of the 401k on the date you filed your bankruptcy, not the day you cashed it in. You will also need to file a motion to retain the proceeds of the 401k that you withdrew. Even though they may have been exempt; once you take out the money, they are like a bonus or tax refund. Since you have already spent the money, you need to ask for permission retroactively. Your attorney can discuss this more fully with you.
Answer Applies to: Missouri
Fluhr & Moore, LLC | Steven S. Fluhr
You need to speak to your bankruptcy attorney. The failure to disclose could lead to a denial or set aside of your discharge at a future date. Because the 401(k) was either exempt or not part of the bankruptcy estate, disclosure now may be the best option.
Answer Applies to: Missouri
The Law Office of Darren Aronow, PC | Darren Aronow
If you paid 100% of your debt then there was no real harm done. You may want to tell the trustee and have your attorney amend your petition, but if you did not pay 100% of your unsecured debts and you do not amend it then you committed fraud on the federal courts.
Answer Applies to: New York