As bankruptcy attorneys, we are well aware of the fear and stress that can come along with filing for bankruptcy. Our clients ask: “How will this affect my financial future?” 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 (which is a retirement savings plan supplemented by your employee) is not impacted when you file for bankruptcy. The same goes for other retirement savings plans such as 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 big no-no when filing for bankruptcy. You don’t want to 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. For bankruptcy attorneys who want to help you build a better financial future, give us a call at Craft Law Offices in Greenville, NC.