Since you could remember, you’ve been putting money aside for your retirement. But here you are, contemplating bankruptcy. You are worried and concerned. You ask yourself: Will bankruptcy leave me destitute? Will I be able to retire if I file for bankruptcy? The short answer is yes.
Don’t stop reading now. There is more.
Let’s do a quick recap of the types of bankruptcy filings. There are two types of bankruptcy filings, chapter 7 and 13.
- Chapter 7 lets you wipe out many debts quickly, but you might have to sell some of your stuff to pay creditors. However, only some things can be taken from you; some things are protected.
- Chapter 13 doesn’t make you sell your stuff. Instead, you agree to pay back some or all of your debts over time, like a repayment plan that lasts 3 to 5 years.
How are retirement funds generally treated in bankruptcy?
The good news is that the law has rules to keep your retirement money safe if you file for bankruptcy. This means that even if you’re having difficulty paying bills, you won’t have to give up the money you’ve saved for when you’re older.
Most of the money you put away for retirement, like in a 401(k) plan at work, IRAs, and pensions, is protected during bankruptcy.
Now, here’s a curve ball. There are some rules about how much of your retirement money is protected. For example, there’s a limit on how much money in an IRA is safe from bankruptcy. Also, if you’ve inherited an IRA from someone else, it might not be fully protected. To know how to proceed, call our office and schedule a meeting.
In Chapter 7, your retirement accounts will usually be safe, and you won’t have to use that money to pay off debts. The law protects these accounts so you can still have money for the future.
With Chapter 13, you also get to keep your retirement savings. Plus, the court will look at your whole financial situation and devise a plan that lets you keep saving for retirement while you pay back some debts.
Strategic Considerations for Protecting Retirement Funds
When you file for bankruptcy, you must be honest and tell the court about everything you own, including your retirement accounts. Being honest helps make sure your retirement money is protected.
You can use special rules called “exemptions” to protect your retirement money in bankruptcy. These rules say what you get to keep away from creditors. You might choose between state and federal rules to find the best protection depending on your situation.
Suppose you want to know more about the protections you have against creditors. In that case, you can read our previous article Defending Your Rights: What You Need to Know About Creditor Harassment Laws in Bankruptcy.
Talking to a bankruptcy lawyer is a smart move. At C. Scott Kirk Law Offices, we can help you understand how to protect your retirement savings and guide you through the bankruptcy process.
It is very important to plan how to handle your money, especially when considering bankruptcy. Knowing how bankruptcy affects your retirement can help you make better decisions for your future.
Filing for bankruptcy might seem scary, especially when you’re worried about your future and retirement savings. But in most cases, your retirement money will be safe. If you’re considering bankruptcy, getting professional advice can help. At C. Scott Kirk Law Offices, we’ll ensure you understand your rights and help you protect what you’ve saved for the future. Remember, understanding how bankruptcy affects your retirement savings is a key step toward managing your financial health.