Some people call Chapter 7 bankruptcy liquidation bankruptcy. That name comes from the potential obligation to sell or liquidate assets before receiving a discharge of eligible unsecured debts.
Those pursuing relief through Chapter 7 bankruptcy have the ability to exempt specific assets from liquidation when they file. Home and vehicle equity are among the resources that people can protect.
Filers may also have retirement savings that they do not want to lose in their pursuit of financial relief. Are there exemptions available for retirement accounts during a Chapter 7 bankruptcy case?
Filers can often preserve retirement resources
Current bankruptcy statutes do provide exemptions for different types of retirement savings accounts. Pensions that are subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) are typically exempt from liquidation in Chapter 7 bankruptcy.
People can also typically exempt the contents of a 401(k) or 403(b) account. Traditional and Roth IRAs have at least partial protection. The federal government establishes a maximum exemption amount that is subject to reevaluation every three years. Currently, people with individual retirement accounts (IRAs) can protect $1,512,350.
The type of account is a key consideration when determining whether retirement savings could be vulnerable during bankruptcy. Many filers can preserve most, if not all, of their retirement resources for the future. The ability to preserve retirement savings is important in rebuilding their lives financially after bankruptcy.
Learning about the rules for asset exemptions can help people minimize the financial complications caused by Chapter 7 personal bankruptcy. Having experienced legal guidance can make a difference in how smoothly the bankruptcy process goes.