Is My 401k Protected from Bankruptcy?

401k protected from bankruptcyIn most cases, your 401k is protected from bankruptcy. However, it’s important to work with an experienced attorney when filing because every state has different laws and exemptions.

Bankruptcy protection doesn’t apply to all retirement savings. Bankruptcy laws are complicated and 401k savings and other assets. Working with an expert who understands the laws affecting your case is an essential part of achieving bankruptcy success.

Here’s what you need to know about how bankruptcy affects your retirement savings.

How Do Federal Bankruptcy laws Impact Common Forms of Retirement Savings?

Many people have accumulated a variety of different types of retirement savings. Understanding how filing for bankruptcy affects each type helps you take the appropriate actions to protect what you’ve saved.

401k Savings

401k investment accounts are exempt from bankruptcy proceedings. The court can gain access to money you’ve liquidated from these accounts. This is one of the reasons why it’s important not to turn to your 401k savings when you’re facing financial difficulties.

If you liquidate these accounts to help ease your financial strain and later file for bankruptcy, there’s a chance the court could take that money. Not to mention the penalties associated with liquidating these accounts.

Many people are better off leaving their 401k savings accounts untouched and instead, filing for bankruptcy to deal with their debts.

What about Other Types of Retirement Savings?

Social Security

Bankruptcy laws protect social security savings from the court. However, there’s a risk once that money is in your regular bank account. If you live in a state where the bankruptcy court has access to your bank accounts, the money within the account could be at risk. This is true even if a protected entity like social security deposited it.

One of the best ways to protect social security savings is to have this money deposited into an account that is strictly for social security money. This ensures the court can easily identify the money as social security payments because it’s not mixed with other income streams.


Some private companies provide the benefit of a pension to employees. If you’ve accumulated pension savings from your employer, the bankruptcy court cannot take that money as long as it is a qualified account under the Employment Retirement Income Security Act of 1974 (ERISA).

Pension accounts from the government, a church, a non-profit organization, or another employer that offered pension benefits might also qualify for exemption depending on how they are classified by the Internal Revenue Code.


People who have accumulated retirement savings in a Traditional or Roth IRA receive a certain amount of protection when they file for bankruptcy. The amount of money entitled to protection increases periodically, so it’s important to work with your attorney regarding IRA savings protection.


Bankruptcy laws exempt tax-deferred retirement annuities, but there’s no protection for other annuities. You and your attorney can discuss your options if you’re concerned about annuity savings and bankruptcy.

Speak to Your Bankruptcy Attorney about Protecting 401k and Other Retirement Savings When You File

A lot of the money you’ve saved for your retirement is exempted from liquidation when you file for bankruptcy. This is one of the reasons it’s important to avoid using this money to prevent bankruptcy if you’re struggling financially. In many cases, bankruptcy is the better option even if someone has significant retirement savings.

For more information or to speak to an attorney who can help you make the most of bankruptcy, contact R. Flay Cabiness, II, P.C. at (912) 417-5041 (Brunswick, GA); (912) 809-2141 (Hazlehurst, GA) or; (912) 324-3176 (Jesup, GA) to schedule a consultation.

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