As bankruptcy lawyers at Craft Law, we are well aware of the fear and stress that can come along with filing for bankruptcy. When our clients first come into one of our offices considering filing for bankruptcy, one of the first questions they ask is, “But how will filing for bankruptcy affect my future financially?” From your mortgage to your car payment to your retirement plans, your financial future after bankruptcy is often brighter than you’d think.
Your 401k, a retirement savings plan supplemented by your employee, is not impacted when you file for bankruptcy. The same goes for other retirement savings plans (like 403b’s, IRA’s, etc.). Fortunately, federal laws protect these types of accounts from creditors, so they will stay safe after you file for bankruptcy.
When it comes to your 401k, there is one important thing to remember that could cause you more financial distress in the future: don’t cash out your 401k to help pay off your debts. Once money is removed from your 401k, it loses its exempt status and is free game for creditors. In addition to that, cashing out your 401k early means you will also have to pay penalties on what you do remove from the account. All in all, you should leave your 401k where it is, and think of it as savings for a fresh financial future.
For more information about your 401k and bankruptcy, visit the thebankruptcysite.org. If you’re ready to meet with bankruptcy attorneys who want to help you build a better financial future, give us a call at Craft Law Offices in Greenville, Morehead City, and Rocky Mount, NC.
Legal and financial concerns can consume your life. They can contribute to physical, emotional and marital difficulties. Our goal is to help our clients resolve these issues with the best possible results in the most stress-free way possible. Bankruptcy does not have to be a bad experience. We are also available to assist you, your family, or someone you know with traffic violations and underage drinking citations.