You may be wondering how filing for bankruptcy will affect your 401k or other retirement accounts. Will your accounts be used to pay creditors? Can you keep any of your retirement savings? Should you use your retirement accounts to pay down, or off, your debts rather than file for bankruptcy?
Leslie Craft, an experienced bankruptcy attorney in eastern North Carolina. can answer these and any other bankruptcy-related questions you may have. Knowing the answers to these questions will ensure you are well-informed before you decide if bankruptcy is right for you and your family. For bankruptcy advice that is specific to your situation, call Leslie at 252-752-0297 to schedule a free consultation.
CAN CREDITORS GET YOUR RETIREMENT ACCOUNTS?
Most retirement accounts, such as a 401k, are protected from creditors and cannot be touched by a bankruptcy trustee. These funds are protected by federal bankruptcy laws, so it is not a good idea to cash in any of your retirement accounts to pay off, or pay down, your debts.
In a Chapter 13 bankruptcy none of your assets are taken from you. Your monthly repayment amount is determined by your income and your retirement savings is only included if you want them to be. Under Chapter 7 bankruptcy, qualified retirement accounts are categorized as exemptions, meaning they cannot be liquidated to pay your creditors.
SHOULD YOU BORROW FROM A RETIREMENT ACCOUNT?
The answer is NO! Before you make the decision to withdrawal money from a 401k or other retirement accounts you need to speak with a knowledgeable bankruptcy attorney. Since these types of accounts are protected under bankruptcy law, you may be better off filing for bankruptcy and preserving your retirement funds. These are some reasons you should not access your retirement accounts if you are in over your head:
- Cashing out your retirement account could lead to tax penalties for early withdrawal, potentially making your debt worse. Tax trouble is worse than credit card trouble!
- Transferring your retirement funds into another account could mean they lose retirement fund exemption, thus becoming accessible to your creditors.
- Moving funds into a retirement account before filing for bankruptcy could raise a red flag. Your bankruptcy trustee could think you are attempting to shield assets which is considered fraud.
Your retirement savings is a representation of years of hard work. Losing your retirement funds now, could be a major concern in the future. Make sure you contact a bankruptcy attorney and get answers to your questions from someone who has your best interest in mind. Get the debt relief you deserve without losing your 401k. Call Leslie Craft, a trusted bankruptcy attorney, she can help you evaluate your financial situation, so you make decisions that are best for you and your family.