The situation is simple. Nowadays many people will roll their retirement funds (401k, 403b, IRA, etc.) into a ROBS account to self-fund a business. So imagine for a moment, you take out retirement funds, self-fund a business. The business technically is 95% owned by your Retirement Accounts (call them 401k for simplicity) and 5% funded by you.
As a business owner, you take an SBA loan, your bank of course never gives the correct amount of working capital, so you end up using personal credit cards, personal funds, etc. to help your business succeed. And in fact your business does succeed. But you are left in the unenviable position of being essentially bankrupt. But you have a business that has a great chance of success. You still have monies in your 401k funds. And to survive you need to consider personal (not business) bankruptcy as your debts exceed your ability to pay them. And you are not taking a salary from your business because it needs the working capital to continue growing successfully. So the question becomes, if this individual files for personal bankruptcy, and if there 401k retirement funds are protected, and it so happens that the 401k owns 95% of the business, is that business protected??
The question posed here - Is a 401k funded business (ROBS) protected or exempt from personal bankruptcy???
