When individuals declare bankruptcy, they often lose many of their savings accounts and assets. Many people do not know, though, what happens to their retirement savings when they declare bankruptcy. Are retirement accounts exempted from bankruptcy proceedings?
The answer to this question varies. In most cases, whether an individual gets to keep his or her retirement savings relies upon what kind of savings account the individual has. The reason for this is that some retirement plans are considered part of the bankrupted individual's estate while others are not.
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This is an important distinction, because the only property that can be liquidated for bankruptcy is property that is part of the bankrupted individual's estate.
Individuals who have 401K retirement plans, for example, are safe from retirement liquidation. This is because 401K retirement plans are not considered part of an individual's retirement funds. As such, an individual is allowed to retain the full amount of his or her retirement.
Other forms of retirement, such as IRAs, may be considered a part of an individual's estate though. This means that the individual will be forced to liquidate at least part of this retirement fund as part of bankruptcy proceedings.
It is important to note that individuals who have non-exempt retirement plans like IRAs may be allowed to keep up to $1 million in their retirement plans. Individuals should discuss the specifics of this allowance with their lawyers for more detailed information regarding their particular cases.
Individuals who are facing bankruptcy may want to speak with a lawyer about their retirement plans before making any declarations to learn if they qualify for a retirement exemption.
If you or someone you know is facing bankruptcy, learn about what will happen to your retirement savings from the Arizona bankruptcy attorneys of the Harmon Law Office, LLC today.
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