Does bankruptcy affect a persons 401K as well?
It takes years of hard work to establish a nice home to raise a family, but you risk losing the security of your nest egg if forced to file for bankruptcy. A 401K is one of the smartest ways for any working adult to ensure that they are not left completely empty-handed if financial circumstances become hopeless. Whether you file Chapter 7 or Chapter 13, rest assured that it is not going to affect any untouched 401K money. The only time a creditor can seize money from this account is if you make any type of withdrawal before filing because the money is then considered an unprotected asset.
Chapter 7 Bankruptcy
Only certain assets are protected from seizure with this type of bankruptcy because most valuables are forcibly surrendered to pay creditors. Changes to bankruptcy law that went into effect in 2005 provide exemptions on most pension plans and retirement accounts under Chapter 7. Keep in mind that if you are storing money in a personal savings account with the intention of holding for retirement, it is not considered eligible for the same protection, which could potentially cause you trouble when you plan to retire. For extra security in your retirement, having a look at a site like https://www.keyadvice.co.uk can help inform you on matters regarding things like equity, which could help you take control of your financial future.
Chapter 13 Bankruptcy
It is possible to hold onto some important assets under Chapter 13 because the debtor must agree to a payment plan rather than forfeit their valuables. This type of bankruptcy does forgive a certain amount of debt with the creditors as long as you are able to repay the determined amount. The judge responsible for the case is not going to consider any legitimate retirement savings as a factor in the repayment plan unless you make the mistake of withdrawing it early. Once an agreement is established, it is safe to use the funds to make payments without it counting against you.
Protecting Your Retirement Fund
Money purchase plans, IRAs, 403(b), profit-sharing plans, and 401(k)s are retirement funds protected from seizure under law. As long as the judge overseeing the case determines that your retirement account is legitimate, you do not risk losing it when you file for bankruptcy. Never transfer any of the money to a regular checking or savings account because it is then considered a debt obligation.
One of our educated specialists is available to speak with you about different bankruptcy cases and ways to save your assets from seizure if you need to file. Take a moment to fill out the contact form so that we are able to give you sound advice when it is most convenient for you.