Retirement accounts, namely 401(k)s, IRAs, and pension plans are protected. There are some nuances like if you inherited a retirement account or possibly received it from a divorce, that may mean it isn’t a protected asset, but overall, these assets are almost always protected. And if you do have a retirement account that was inherited or awarded in a divorce, setting up a call with an attorney is your best starting point.
Many people take out 401(k) loans from their retirement account, as an effort to try to avoid filing bankruptcy. If you do have a 401(k) loan, and still find yourself needing a bankruptcy, the 401(k) loan passes through the bankruptcy. What this means is that you will just continue to pay yourself back on the loan. A 401(k) loan can’t be discharged in a bankruptcy. Either you will continue to make payments on it, or you can elect to receive a 1099 tax form, that will show it as a retirement distribution instead, and not a loan.
You also can continue to contribute to your retirement accounts whether you file a chapter 7 or a chapter 13. So you don’t have to stop contributing to your retirement account just to file a bankruptcy.
When the time is right, or when you are ready to get your life back, reach out to Minnesota’s HIGHEST GOOGLE reviewed law firm (we use no review software at all) by going now to www.kainscott.com. You will be glad you did.