Under the Bankruptcy Code, the money in your 401k or IRA is protected up to One Million Dollars. ($1,000,0000) If you don’t own a home, the most you can protect from your creditors is approximately $10,500. If you are thinking about taking money from your 401(k) or IRA to make ends meet, you may want to consider talking to a Bankruptcy Attorney before making the withdraw. Chances are, the withdraws are only a band aid on your debt problems, and will result in a non-dischargeable tax burden that will just make matters worse. In addition, many people are limited in the number of times they can withdraw money, or the reasons they can withdraw. As a consequence, you may be tempted to withdraw more money than needed, just in case something comes up. If you put that money in the bank, its subject to garnishment, and may not be protected from your creditors, even in a Bankruptcy.
