If you need shelter from your creditors and you’re considering filing a personal bankruptcy, you are probably concerned with what will happen to your assets. Although bankruptcy is the most comprehensive tool for dealing with your debt, it also requires you to disclose everything you own. A retirement account is typically one of a debtor’s most valuable assets. Fortunately, bankruptcy law provides protection for certain types of property and exempts them from being included in your bankruptcy estate. In other words, the debtor keeps possession of the exempt assets.
Tax-exempt retirement accounts, such as 401k’s, are afforded significant protection. Emerging from bankruptcy with your retirement in place is important to a debtor obtaining a fresh financial start. It should be noted that Individual Retirement Accounts (IRAs) and Roth IRAs are also protected (up to certain amounts).
One of the most significant exemptions you can claim is one that protects the funds in your retirement account. Obviously, this is crucial for many people since their retirement account is one of their most important assets they own. There are federal exemptions and most state exemptions that apply to 401K accounts, pensions, profit sharing and Individuals Retirement Accounts (IRAs). The current cap on the amount of exempt funds in an IRA is currently $1,245,475 per person. For most debtors, this amount is more than enough and their account is fully protected.
If you intend to file a Chapter 7 or Chapter 13 bankruptcy, it is imperative that you discuss how your filing will impact your retirement accounts. It is particularly important to obtain legal counsel if you have taken out a loan against your 401k account. A loan against your retirement account can add some complexity to your filing and you will need the help of a seasoned lawyer.
To ensure you properly claim all applicable exemptions and protect your valuable assets, including your 401k, contact our office to schedule a comprehensive consultation. Diane Anderson understands that the law can be difficult to navigate. Ms. Anderson offers legal advice in plain English, while providing a compassionate and caring environment for her clients. While it may seem scary, she believes that the law does not have to be something to fear, but instead something you can use to empower yourself to build a better, stronger future for you and your family. Contact us today to schedule a comprehensive consultation.
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