How much trouble am I in because of not knowing that I have a 401k account? 11 Answers as of February 25, 2014

I 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??

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Stuart P Gelberg
Stuart P Gelberg | Stuart P Gelberg
You need to disclose the 401 k but it is not "property of the bkry estate" and not subject to your creditor's claims or the trustee.
Answer Applies to: New York
Replied: 2/25/2014
GARCIA & GONZALES, P.C.
GARCIA & GONZALES, P.C. | Richard N. Gonzales
No problem. Amend your schedules to disclose your 401(k), as of the date of filing. It will not have an impact on your bankruptcy.
Answer Applies to: Colorado
Replied: 2/24/2014
Portland Bankruptcy Law Group
Portland Bankruptcy Law Group | Christopher J. Kane
You have nothing to worry about. Your 401k was 100% exempt and, no matter how much money was in that account, it would not have affected your Chapter 13 in any way.
Answer Applies to: Oregon
Replied: 2/25/2014
A Fresh Start
A Fresh Start | Dorothy G Bunce
Amend your bankruptcy schedules immediately. Your 401 K is an exempt asset, so not having listed this is not really a major problem, but it should be corrected right away now that you know about it.
Answer Applies to: Nevada
Replied: 2/24/2014
Garner Law Office
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
Replied: 2/24/2014
    David R. Fondren, Attorney at Law
    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
    Replied: 2/25/2014
    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
    Replied: 2/25/2014
    Rhymer Law Firm
    Rhymer Law Firm | William Rhymer
    I would suggest you talk to your Chapter 13 attorney and he or she will work it out for you.
    Answer Applies to: Georgia
    Replied: 2/25/2014
    The Law Office of Darren Aronow, PC
    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
    Replied: 2/24/2014
    Law Offices of Eric W. I. Anglin
    Law Offices of Eric W. I. Anglin | Eric W. I. Anglin
    You need to advise your attorney about the 401(k) acct. If it is exempt in your jurisdiction then you will not have to worry about it but you need to tell your attorney.
    Answer Applies to: Indiana
    Replied: 2/25/2014
    Moore Taylor Law Firm, P.A.
    Moore Taylor Law Firm, P.A. | Jane Downey
    Tell your attorney
    Answer Applies to: South Carolina
    Replied: 2/25/2014
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