Does Filing For Bankruptcy Mean Losing Your Retirement Accounts?
How Does Bankruptcy Affect My Retirement?
If you’ve been thinking about filing for bankruptcy, you might be wondering whether you will lose your retirement accounts after filing. Even if you are feeling overwhelmed with debt and are being hassled by debt collectors, the fear of losing decades of hard work and savings may be preventing you from finding relief through filing for bankruptcy. Naturally, you want to protect your hard-earned money in your retirement accounts as you explore options for debt relief.
Although it’s always best to consult with your Reno bankruptcy law office for personalized legal guidance for your situation, there are some basic principles in Nevada law that might help put your mind at ease.
Are Retirement Accounts Protected In Bankruptcy?
In the majority of cases, people who choose to file for bankruptcy in Nevada are able to keep their pension and retirement accounts, whether they file for Chapter 7 or Chapter 13 bankruptcy. However, there are always exceptions to this rule. Whether you lose or keep the money in your retirement accounts will depend on factors such as where the funds came from.
Whether a retirement account will be protected in bankruptcy depends on whether it qualifies under the Employee Retirement Income Security Act of 1974, known as ERISA. A federal law intended to protect people who live on private employer-sponsored retirement accounts and health coverage plans, ERISA protects retirement accounts from creditors. Retirement accounts that do not qualify under ERISA may not be protected, so consult with your Reno bankruptcy attorney to discuss about your circumstances.
When a person files for Reno chapter 7 bankruptcy, their retirement accounts under ERISA are protected, even though this type of bankruptcy will involve a liquidation of most of their assets, including their home, savings accounts, insurance payouts, and more. State and federal laws protect filers’ retirement accounts from being liquidated to pay off their debts.
When filing for Chapter 13 bankruptcy, debtors are able to keep most of their assets, including their home, retirement funds, and savings accounts, because this type of bankruptcy involves creating a repayment plan to repay a portion of your debt.
Most people are relieved to learn that retirement fund protection has no fund limit, which means that your entire account is protected. Protected accounts include 401(k)s, IRAs, and other plans.
What Happens if I Add Or Remove Money From My Retirement Accounts Before Filing For Bankruptcy?
Because federal law protects most retirement accounts during bankruptcy, it’s best to keep the money in your retirement accounts so it can be protected during the bankruptcy process. Taking the money out of the retirement accounts will have negative effects. Cashing out your 401(k) early could mean paying significant penalties for early withdrawal, while choosing to transfer your retirement money to another account could cause them to lose retirement fund status and therefore their protection, leaving your money vulnerable to bankruptcy trustees.
Some people consider transferring as much as money as possible into their retirement accounts before filing for bankruptcy, but that can result in accusations of fraud and put your entire bankruptcy in jeopardy.
Because many different factors can cause your retirement accounts to lose their exemption status, it’s imperative to consult with an experienced Reno bankruptcy lawyer who can help you understand all of your options and determine the best way to protect your retirement accounts.
What About Retirement Benefits That Are Being Paid As Income?
If you are retired and taking your retirement benefits as income, you probably have additional question and concerns about filing for bankruptcy. Speak with a trusted Reno bankruptcy law office to determine your eligibility for filing for bankruptcy. Whether you choose to file Chapter 7 or Chapter 13 bankruptcy, your retirement income will be taken into account by your trustee. Social security and retirement incomes are viewed differently in bankruptcy.
Protect Your Future By Calling Reno’s Top Rated Bankruptcy Attorneys
The skilled attorneys at Zero Down Bankruptcy work with debtors everyday throughout the greater Reno area, helping their clients find freedom and relief from crushing debt. We will provide legal counsel and help you understand your debt relief options with respect, confidentiality, and care. If you are wondering whether filing for bankruptcy is the right option for you and are concerned about protecting your retirement accounts or other assets, get in touch with the teach at Zero Down Bankruptcy Lawyers of Reno today for your free case review!