- A 401(k) account is normally protected from liens resulting from default on unsecured debt. For example, a credit card account in default may prompt the credit card company to seek legal action. According to the Texas Office of Consumer Credit Commissioner, procedures employed by creditors to collect debt from Texas residents must conform both to state and federal law. Texas does not have laws on the books modifying the federal protection of 401(k) accounts from seizure. Therefore, claims for unsecured debt must go through the court system for the claimant to access the consumer's assets. In situations involving unsecured consumer loans, assets in 401(k) accounts are protected.
- According to the state law as written in Chapter 3 of the section of Texas Statutes entitled the "Family Code," community marital property, that acquired during a marriage, includes interest in retirement accounts and accumulated contributions. The law specifies that assets acquired prior to marriage are not subject to judgment claims by the nonparticipating spouse. Hence, contributions made to a retirement account, such as a 401(k), during a marriage may be considered community property, i.e., jointly held assets.
- Chapter 3 of the Family Code gives a judge leeway to decide what property will be liquidated to meet the claims of a distributive judgment. Generally, 401(k) assets would be considered on a case-by-case basis. In distributive actions, where property is divided as part of a divorce decree, balances in pension plans could be subject to division. Furthermore, Texas law stipulates that each spouse must support the other and parents must support children. According to Texas law, an individual can be held liable for debts incurred by a spouse to purchase necessaries. In situations where community property is assessed for purposes of financial support, the court decides.
- Title 3, Chapter 24, known as the Uniform Fraudulent Transfer Act of Texas law, explicitly prohibits a debtor from transferring or hiding assets to avoid creditors. Title 2, Subtitle B, Chapter 16 of the Civil Practice and Remedies Code specifies that the statute of limitations on collecting unsecured debt is four years. If a creditor is awarded a judgment against a consumer, a debtor's attempt to hide assets could result in a lien on any asset, including a 401(k) account.
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