The Solo 401k plan offers asset protection just like other qualified retirement plans. This means that it offers protection from all creditors in case of a lawsuit, default of debt, or bankruptcy. In this Self-directed Solo 401k Quick Tip video, Sense Financial explains more about what would happen to a Solo 401k if the plan owner files for bankruptcy.
Solo 401k Asset Protection
Solo 401k is considered Qualified Retirement Plan. Just like other 401k-plans, in either Chapter 7 or Chapter 13 bankruptcy, your Solo 401k plan is considered to be protected under both federal and state law. Creditors may be able to seize cash and other funds in your savings, checking and brokerage accounts, but by law, they can’t touch the 401k funds. This is why most financial professionals would advise against withdrawing or borrowing from a 401k, which is protected from all creditors.