Are 401k's & IRA's subjec to a Deficiency Judgment? (Colorado)

February 24, 2009 11:44 AM

After a foreclosure & a Deficiency Judgment, can they go after my 401k & IRA?

I am a few months away from foreclosure on a piece of property in Colorado. I assume that the lender will pursue a Deficiency Judgment. If they do, can they go after my 401k and my IRA's? Are there any assets that cannot be touched by a DJ?

Also, maybe I shouldn't assume that they will pursue a DJ. Is there any way to find out if my lender (WAMU - Washington Mutual) regularly pursues them in Colorado?

If it makes any difference, the total value of my retirement savings (401k & IRA) is less than the likely amount of the DJ. In other words, were they to "tap" my retirement savings, it would wipe out 100% of the value AND I'd still owe money.

Thanks for any insight...

posted by olddogeyes to work & money (6 comments total)

I think generally 401Ks and IRAs are beyond the reach of creditors. However, I am not an expert on this.
posted by jayder at 12:16 PM on February 24

Have you declared bankruptcy? If so, your attorney should be able to answer this question, and give guidance. If not, you might consider consulting with one to see if it would help either situation.
posted by nomisxid at 12:29 PM on February 24

Title 11 is the Federal bankruptcy code. 11 USC 522(d) provides in pertinent part:

The following property may be exempted under subsection (b)(2) of this section:

...

(12) Retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986.

Note that this only applies directly if you declare bankruptcy. Whether or not you declare bankruptcy you should talk to a competent attorney in your area.
posted by jedicus at 12:34 PM on February 24

I have not declared Bankruptcy as the property has not yet been foreclosed on. I plan on seeking counsel at the appropriate time.
posted by olddogeyes at 12:51 PM on February 24

Um, dude? The appropriate time is now.
posted by electroboy at 1:32 PM on February 24 [2 favorites]

IRA: Depends on your state's law (almost all provide IRAs are exempt). Call a Colorado attorney and an attorney in the state in which you live (if different than Colorado) to verify.

401(k): Exempt. Federal law.

If you file for bankruptcy, both are exempt under the 2005 Bankruptcy "reforms."

IAAL, but IANYL.
posted by webhund at 2:35 PM on February 24