Will you lose your retirement savings in bankruptcy?

On Behalf of | Apr 4, 2022 | Bankruptcy

You’re facing bankruptcy because your income is simply no longer enough to support all of the bills that you have. Your work has been impacted by the events of the last few years and you’re simply earning less than you were before. You do hope that that changes, but it hasn’t yet, and you’re considering bankruptcy as a way to reorganize your debt or eliminate some of it.

However, you have been setting money aside for retirement for the past 20 years. If you declare bankruptcy, are you going to lose all of these savings?

How did you save the money?

The biggest question to ask may simply be how you decided to save for retirement. For instance, some of the most common ways that people put money aside are already protected. The money is exempt from the bankruptcy process and you’re not going to lose it. This could be true if your money is in a 401k, for example, or if you have a pension plan. Your Social Security should also be protected. If you have an IRA account, most of that account will likely also be protected.  

However, money that you simply have on hand or that you’ve stored in the bank account may not be protected. So if you just opened a savings account and you put money into it every month, then your savings could be at risk. If you established an official fund for retirement, then you are likely protected.

Bankruptcy can be very useful, but it is important to know how to navigate the system and what steps to take.

 

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