A lot of people considering bankruptcy are worried about their retirement.
Good news: You can still file for bankruptcy and be assured that your retirement plan is safe and secure. Thanks to 2005 changes in bankruptcy laws, your individual retirement account (IRA) and pension are protected during bankruptcy. With a few limitations, creditors won't be able to seize these assets to pay off your debts.
The entire amount of your retirement account may be protected if you have any ERISA qualified plans, such as a 401(k), 403(b), IRA (SEP and SIMPLE), Keogh, profit-sharing plan, money purchase plan, or a defined-benefit plan.
The exception to this rule applies to traditional IRAs and Roth IRAs. For these accounts, the exemption from creditors (the amount that is protected) is $1,171,650 per person. This number is updated each year to account for inflation and increased costs of living. If you have more than this amount in your traditional or Roth IRA, it might be used to pay back your creditors.
One important note to remember: while the funds in your retirement account are safe, benefits paid to you as income from these accounts are not typically exempt. Your creditors may garnish this income; but they can't take any benefits that are necessary for your support.
A healthy retirement plan is necessary for a secure future. Fortunately, bankruptcy shouldn't prevent you from having these benefits when you retire. Castle Law Office has been handling bankruptcies for Kansas City clients from more than 14 years. If you need the fresh start bankruptcy can provide, call us today at 816-842-6200 to speak with an attorney. Or click here to email us and schedule your free consultation.