Can I save my 401k and file chapter 7 bankruptcy?

The short answer is that you will probably be able to save your 401K, even if you file a Chapter 7 liquidation proceeding bankruptcy. 

The purpose of a Chapter 7 bankruptcy is to compile a list of your major, valuable assets (the “bankruptcy estate”) that may be “liquidated” (sold) by the bankruptcy court in order to make payments on your debt.  However, some of your assets may be exempt from liquidation (sale) to pay debts. 

The bankruptcy court uses the law of your state to determine what exemptions apply and the amount of money that is exempt.  That being said, most states have laws that exempt pension funds and 401K accounts from liquidation.  In some states, the law provides that a pension fund is not even included in the bankruptcy estate.  You will likely be allowed to keep such exempt assets, free from any threat of collection efforts against them. 

If a creditor has placed a lien against exempt property or attempted to garnish money from it, you should immediately inform your bankruptcy attorney.  Your bankruptcy attorney can file a motion with the bankruptcy court to “avoid” (eliminate) the lien, and the bankruptcy court will most likely ensure that the lien is removed.  For more specific or detailed answers that apply to your personal situation, you should consult your bankruptcy attorney.

Talk to a Bankruptcy Lawyer to learn more about how bankruptcy laws would work in your particular situation.

Good luck.