When considering bankruptcy, some worry about whether they will have to give up their retirement accounts in order to get out of debt. Fortunately for those who want to protect their retirement savings, most retirement savings and 401k accounts are protected when you file for bankruptcy.
There are exceptions to the protection of a 401k plan in bankruptcy, based on the particulars of the way that retirement is structured and how much money is in an account.
Bankruptcy can be an intimidating process, and the safety of your retirement savings is probably high on the list of priorities. You don't have to go through the process by yourself. A bankruptcy lawyer may be able to help, answering your questions and providing the insight to help you make effective decisions as you struggle with debt.
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There are a number of retirement savings accounts that are typically protected during a bankruptcy case. There is the 401k mentioned above, and also Roth IRA accounts, IRA accounts and 403(b) accounts, as well as some pensions and Keough plans. In most situations, the law states that retirement accounts are completely protected during bankruptcy.
There are a few situations in which retirement savings are not protected during bankruptcy. For the most part, the pension plans, IRA accounts and 401k plans mentioned above are protected. One exception is if a 401k has a value above $1 million. In this case, the amount in the account that goes over $1 million is accessible by the bankruptcy court.
Also, any savings marked for retirement that are kept in a normal savings account may not be protected during bankruptcy. Some part of these funds could be seized by the court. And any money that has been taken out of a retirement account will typically not be protected.
The rules based on different types of bankruptcy can vary when it comes to retirement accounts, as well, so you may want to refer to a bankruptcy lawyer before assuming anything.
Consider talking to one of our sponsoring bankruptcy attorneys about your 401k and bankruptcy. A bankruptcy attorney may be able to set you at ease, providing you with information about bankruptcy laws and your case. Simply fill out the free case evaluation form below, and we'll be in touch with you about how to contact a lawyer.