Facing bankruptcy can be overwhelming, and it’s natural to worry about whether your retirement savings are safe.
Fortunately, Solo 401k assets are generally protected from creditors. If you file under Chapter 7 or 13, qualified plan accounts—such as 401k plans and Solo 401k—are covered by federal bankruptcy protections for “retirement funds” in tax-exempt accounts. For employer-sponsored plans, these protections usually don’t have a dollar limit. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) clarified that tax-qualified retirement plans, including Solo 401k accounts, are excluded from the bankruptcy estate.

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GET STARTEDSolo 401(k) eligibility and contribution limits depend on IRS rules. Carry does not provide tax advice, consult a tax advisor. Carry Advisors LLC, an SEC-registered investment adviser, provides investment advisory services for discretionary and non-discretionary accounts (e.g., Solo 401(k), IRA, taxable brokerage accounts). Bank and trust accounts are not advised by Carry Advisors. Brokerage accounts are introduced by Global Carry LLC and carried by DriveWealth LLC, both members FINRA/SIPC. Advisory fees may apply and additional disclosures are described in our Form ADV and CRS.
ERISA, the Employment Retirement Income Security Act of 1974, also plays a role. The funds in your Solo 401k legally belong to the plan administrator until you withdraw them as income, so they cannot be released to anyone else.
Knowing how these protections work can help you feel more confident about your retirement savings. Keep reading to understand the limits, rules, and what to watch out for when it comes to Solo 401k accounts in bankruptcy.
📌 Also read: Top 10 Mistakes to Avoid With A Solo 401k
Solo 401k Funds in Transit Are Also Protected
Funds moving from a Solo 401k to another eligible retirement account (such as an IRA) are typically protected under BAPCPA. If the distribution is eligible for a rollover and is deposited into another tax-exempt retirement account within 60 days, it usually retains its bankruptcy protection.
What Happens If You Withdraw the Funds?
Once you withdraw Solo 401k funds to a personal bank account, they generally lose their bankruptcy protection. At that point, creditors may have access to those funds because they are no longer held in a tax-qualified retirement vehicle.
Is There a Limit on How Much Is Protected?
There is generally no federal dollar limit on the bankruptcy exemption for assets held in a Solo 401k or other employer-sponsored qualified plan. That means your full account balance is typically covered under federal protections.
Exceptions That Affect Solo 401k Protection
Although Solo 401k accounts are generally protected in bankruptcy, there are certain situations where creditors or government authorities may gain access to your funds.
Former Spouse or Divorce Obligations
If you owe child support, alimony, or are going through a divorce, a former spouse or dependent may be entitled to a portion of your Solo 401k assets. In these cases, retirement funds can be used to satisfy family-law obligations.
IRS Tax Liens
The IRS can seize Solo 401k assets to settle a tax debt, but only if you are eligible to take distributions from your plan. If plan rules or age restrictions prevent you from withdrawing funds, the IRS cannot override them. It’s also important to note that only the IRS has this authority — state and local governments cannot access your Solo 401k assets to satisfy tax debts.
Key Takeaways
Solo 401k accounts are generally protected in bankruptcy, but there are exceptions that may affect access to funds. Knowing how these protections work can give you more confidence when planning for your retirement.
Take a closer look at your plan and speak with a qualified professional to help you understand your specific situation and options.
Disclaimer:
The Carry Learning Center is operated by The Vibes Company Inc. (“Vibes”) and contains generalized educational content about personal finance topics. While Vibes provides educational content and technology services, all investment advisory services discussed on this website are provided exclusively through its wholly-owned subsidiary, Carry Advisors LLC (“Carry Advisors”), an SEC registered investment adviser. The information contained on the Carry Learning Center should not be construed as personalized investment advice and should not be considered as a solicitation to buy or sell any security or engage in a particular investment, accounting, tax or legal strategy. Vibes is not providing tax, legal, accounting, or investment advice. You should consult with qualified tax, legal, accounting, and investment professionals regarding your specific situation.
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