Expert: Terry Leeders - 5/26/2007

Question
I'm considering filing chapter 7 bankruptcy.  I have learned that between my husband and myself we can have $50000 in assets without losing them.  Is a 401 K inlcuded in that or is it exempt?  It is through my company and held by Fidelity.  My other question is through my research on the internet I read that the fact that I have a loan against my 401K could hurt my chances of filing chapter 7.  Is this true.

Answer
in most states, retirement plans are exempt under state or federal law.  You need to check with a local attorney to confirm this. It is in Illinois where I practice.  The issue with a 401(k) loan repayment, is that the payment you are making is income that would need to be factored into the budget and means test analysis.