Q. How does bankruptcy affect 403(b) loans? We have a client who just turned 55½ and at this time is not separated from service. She has a mortgage loan but also $57,000 in consumer debt, of which approximately $13,000 is from loans taken on her 403(b) accounts. If she files for bankruptcy, what happens to those 403(b) loans?
A. The bankruptcy has no impact on a 403(b) loan. The loan is not discharged in the bankruptcy, and payments can continue to be made.