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Retirement Assets and Bankruptcy

How does bankruptcy affect your retirement assets?

There are many people in difficult financial situations who look to their retirement assets as a resource to pay their debts. It is helpful to know that, in a bankruptcy, there are exemptions that protect your retirement assets, meaning that, when you file for bankruptcy, your retirement assets are protected. An exemption is an amount that the bankruptcy court is allowed to let you keep even if you file a bankruptcy. The exemption is the actual amount that the bankruptcy court cannot interfere with, and must allow you to keep. An unlimited exemption means that there is no limit to the amount that you are allowed to keep through a bankruptcy filing

There is no reason to tap into your retirement assets to pay your debts when you can use bankruptcy to cure your debt and keep your retirement assets in tact. The basic idea is to file a bankruptcy before your retirement assets are attacked by collections activities. Below are additional details about what can be protected through the bankruptcy process.

Retirement accounts include:

  • 401(k) accounts (private retirement)
  • 403(b) accounts (non-profit retirement)
  • CalPERS accounts (public employees’ retirement system)
  • STRS accounts (state teachers’ retirement system)
  • Roth IRAs
  • Traditional IRAs

Bankruptcy protection provides unlimited protection for most retirement accounts. The only limitation on retirement exemptions are for Roth and traditional IRAs. The bankruptcy code caps the value of the exemption for Roth and traditional IRAs at one million dollars per individual, which is adjusted every three years for inflation. If the account does not qualify as completely exempt, the bankruptcy code may provide other options to protect at least a portion of the funds. A good bankruptcy attorney should be consulted to determine what, if any, exemptions may apply.

Bankruptcy Law Professionals can be reached anytime at 855 BKPROS1 or 855 257-7671. If you are located in Orange County or Inland Empire or Los Angeles, we can help you. We are capable of handling everything by phone, email or fax if necessary. We locations in Orange County and Riverside to help our clients.

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