I gave away a car and can the touch a 401k?

Question Details: I gave my daughter one of my cars about 3 months ago that had 9000.00 worth of equity.How will that effect me filing for bankruptcy? Also, what happens to a 401k when you fill?

Asked 10/14/2009 under Bankruptcy | 188 View(s) | More Legal Topics

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Bankruptcy Law Answers

The money you have contributed to a validly created 401K Plan is protected in bankruptcy.  So your are best to leave it right where it is.  If you withdraw any amount those funds become part of your bankruptcy estate and will be available for distribution to creditors; not to mention there can be hefty penalties for early withdrawal.

As for your car, a bankruptcy trustee can recover assets transferred within one year of the bankruptcy filing where the debtor did not get reasonably equivalent value for the asset, or where the transfer was made with intent to hinder creditors.  The "look back" period may be even longer under the law of your state, giving the trustee that same state law look back period in which to recover assets.  Transfers to family member are particularly scrutinized.

I don't know whether or not you are considering filing a Chapter 7 or Chapter 13 or just what your specific financial circumstances are, but if you have more assets than you can protect with the available exemptions you may want to consider filing Chapter 13.  With that, the debtor generally keeps all of their property and "buys back" the non-exempt value from the creditors through payments to the Chapter 13 trustee out of future income .

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