Can the mortgage company claim money from my 401k to cover a short sale?
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Can the mortgage company claim money from my 401k to cover a short sale?
I own a house that I owe about $153,000 on and I believe I will not be able to sell it for what I owe. So I might be able to do a short sale but maybe not which may mean foreclosure. I pay monthly PMI, am 69 years old, receive SS and work part-time. I have $65,000 in my 401k.
Asked on December 31, 2016 under Real Estate Law, Virginia
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 7 years ago | Contributor
No, money in 401 accounts is legally exempt from execution or levying by creditors--they cannot reach it. Note however that it is only exempt while in the 401 account; e.g. if you were to withdraw, say,$10k, use $5k, and put the other $5k in a regular bank account, while in the regular account, it is vulnerable to creditors.
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