How 401(k) Bankruptcy Exemption Can Be Lost

Law360 (October 21, 2019, 5:00 PM EDT) -- The Bankruptcy Code contains a number of exemptions that an individual who has filed for bankruptcy can use to exclude property from the individual’s bankruptcy estate and shelter the property from the individual’s creditors. One of those exemptions is for funds held in a retirement plan that is qualified under Internal Revenue Code Section 401.[1]

A recent case decided by the United States District Court for the District of Connecticut, Jie Xiao v. Ronald I. Chorches, Trustee[2] discusses some of the issues that can arise when an individual who is the principal owner of a small business, in this case Xiao,...

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