Can the mortgage company claim money from my 401k to cover a short sale?

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Can the mortgage company claim money from my 401k to cover a short sale?

I own a house that I owe about $153,000 on and I believe I will not be able to sell it for what I owe. So I might be able to do a short sale but maybe not which may mean foreclosure. I pay monthly PMI, am 69 years old, receive SS and work part-time. I have $65,000 in my 401k.

Asked on December 31, 2016 under Real Estate Law, Virginia

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

No, money in 401 accounts is legally exempt from execution or levying by creditors--they cannot reach it. Note however that it is only exempt while in the 401 account; e.g. if you were to withdraw, say,$10k, use $5k, and put the other $5k in a regular bank account, while in the regular account, it is vulnerable to creditors. 


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