Bankruptcy is a horrible thing to endure, but in these uncertain economic times, it is becoming an all too common occurrence. Most people understand that bankruptcy wipes out almost all the debts for a filer, such as loans, credit card debt, and amounts racked up from any other consumer accounts. However, student loans and tax debt stays with you even after the bankruptcy has been discharged; a Catch-22 that many people only learn of when the bills keep arriving in the mail. The rules surrounding bankruptcy and retirement accounts are equally elusive – which is why it’s essential for you to find out what exactly will happen to your retirement accounts before you file.
Will I Lose My Retirement Savings When I Declare Bankruptcy?
In most bankruptcy cases, the savings you’ve accumulated for retirement will be off-limits to a bankruptcy trustee. When you file a Chapter 7 bankruptcy, most retirement accounts fall under the category of “exemptions” under United States Bankruptcy Code. What this means for you is that your retirement accounts cannot be liquidated for debt repayment, plain and simple.
Additionally, the other form of bankruptcy, Chapter 13, is an even safer route, because none of your assets will be taken from you at all. It’s a debt reorganization program in which your debt payments are reorganized into a manageable monthly bill, and you only include your savings for retirement in the debt repayment plan if you want the amount included. If not, it will simply remain a separate monthly expense for you to pay.
Should I Liquidate My Retirement Accounts to Avoid Bankruptcy?
Probably not. If you want to drain your 401k or any other retirement account to pay down your debt, you should speak to a bankruptcy attorney before you do it. You should ask the attorney whether declaring bankruptcy and having the debt discharged would be a better option for you than using your retirement money to pay it down. In most cases, bankruptcy is the better option. You’ll protect your retirement and have the burden of unpaid bills lifted from your shoulders so you’ll have breathing room again – while still keeping your nest egg for later in life. These attorneys are also helping people fight the xarelto lawsuit, click here to see More about xarelto lawsuits.
Don’t throw away your hard work and sacrifice to try to get a handle on your debt in an attempt to avoid bankruptcy. Doing so could dramatically derail your plans for the future and hurt your financial security during your golden years, when you’ll need that money the most.