The idea of filing for bankruptcy can be a daunting one. This is especially if you have the worry that you are going to lose your retirement fund, which you worked so hard to save up, in this process. Continue reading to learn what happens to your retirement savings in bankruptcy and how an experienced Lousiville, Kentucky consumer bankruptcy lawyer from Schwartz Bankruptcy Law Center can fight to protect it.
What is going to happen to my retirement savings in a bankruptcy filing?
You may be under the assumption that you will have to give up all of your assets to pay off your nondischargeable debts in your bankruptcy filing. Though, you may be wrong to assume so.
The reality is that there are bankruptcy exemptions in place to protect the assets you require to work and live. Examples of these exemptions include some equity in your family home, your standard car, and some of your household belongings. And namely, a majority of ERISA-qualified retirement accounts and pension plan funds qualify for these exemptions, as well.
What retirement accounts and pensions are exempted in the state of Kentucky?
In a bankruptcy filing, the exemption amount for retirement accounts is unlimited. So, the following ERISA-qualified retirement accounts may be entirely protected from creditors:
- 401(k) accounts.
- 403(b) accounts.
- Certain IRA accounts, such as Roth, Sep, and SIMPLE.
- Keogh plans.
- Profit-sharing plans.
- Money purchase plans.
- Defined-benefit plans.
It is worth mentioning that IRA and Roth IRA accounts have a limit of $1,512,350 per person when it comes to exemptions from creditors. This means that the court may request that you use the difference to pay back your creditors.
In addition to these retirement accounts, the state of Kentucky also holds that police and firefighters’ pensions, state and county employees’ pensions, and teachers’ pensions may be exempted.
What happens if I withdraw from my retirement account?
Your retirement account and pension may only be protected so long as the funds remain untouched. Meaning, if you make any withdrawals, you may have to file a wildcard exemption. Ultimately, this type of protection is more difficult to receive.
So, in a Chapter 7 bankruptcy, the court may consider the monthly payments you receive from your retirement account as part of your income. Therefore, they may request you use it to pay back your creditors. And in a Chapter 13 bankruptcy, your retirement income may affect the amount of unsecured debts you must repay, which ultimately may affect your repayment plan.
The bottom line is that, if you are struggling financially, you need to have a skilled Louisville, Kentucky consumer bankruptcy lawyer in your corner. Call or send a message to Schwartz Bankruptcy Law Center today. We look forward to hearing from you.
