When you are struggling financially and being harassed by creditors, the idea of getting safe refuge in bankruptcy can be quite appealing. However, most people are afraid to take this step because they fear what will happen to their assets.
A significant assets for most individuals is their retirement account. Fortunately, federal bankruptcy law provides protection for qualified retirement accounts. In fact, the law sets forth an exemption that removes a qualified 401k, pension, profit sharing or Individual Retirement Account (IRA) from being included in your bankruptcy estate. Most state bankruptcy laws have a similar exemption as well.
When it comes to protecting an IRA, the maximum amount that can be exempted is $1,245, 475 per individual. This is a substantial sum and most debtors have accounts that are well below this amount, so they are protected fully. However, if your IRA account exceeds the cap, you should consult with your bankruptcy lawyer to discuss your options.
In fact, if you are planning to file a personal bankruptcy, you should consult with an attorney to verify that all of your retirement accounts qualify for the exemption. This is also true if you have taken a loan against your 401k account. A loan against your retirement account may add some complexity to your filing, so it is important for you and your attorney to be prepared to address the issues.
Claiming all of the applicable exemptions to safeguard your assets is essential to having a successful bankruptcy case. When you have your initial consultation with your bankruptcy attorney, you should provide all of the records regarding each of your retirement accounts to confirm that the funds will be protected.
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The information on this blog or any blog is not intended as, and should not be taken as, legal advice.