Bolen v. Adams

**Bolen v. Adams: 401(k) Loan Ruling** This case involved a worker who had taken out a loan from their 401(k) retirement account and later filed for Chapter 7 bankruptcy. The key dispute was whether the money still owed on the 401(k) loan should count as a "secured debt" when calculating whether the person qualified for Chapter 7 bankruptcy protection. The worker argued that the 401(k) loan should be treated as secured debt, which would have helped them pass the bankruptcy "means test" - a calculation that determines if someone's income is low enough to qualify for Chapter 7 bankruptcy. A lower court initially agreed with this position. However, the District Court reversed that decision, ruling that 401(k) loan obligations do not count as secured claims under bankruptcy law. This meant the worker failed the means test, creating a presumption that filing for bankruptcy would be an abuse of the system. **What this means for workers:** If you have a 401(k) loan and are considering bankruptcy, be aware that the outstanding loan amount likely won't help you qualify for Chapter 7 bankruptcy relief. This could force you into Chapter 13 bankruptcy instead, which typically requires a repayment plan rather than debt discharge.