If I file for chapter 7, will my retirement accounts be at risk of being liquidated? I have an IRA with $12,000 and a 401k with over $20,000. I am filing in Nevada.
What happens to my retirement accounts if I file for chapter 7?
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Answer: (1)
Your retirement accounts will not become part of your bankruptcy estate. As part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, a broad, federal exemption was put in place covering virtually all tax exempt retirement assets. This include your 401k and IRA. The limit for some types of IRA accounts is over $1 Million, so you’ve got nothing to worry about.
Many bankruptcy attorneys will advise you to talk to bankruptcy lawyer about your option before you even think about withdrawing funds from a retirement account to help get out of debt. If you try to avoid bankruptcy by using up retirement accounts, you are essentially giving up the protection offered you by the US bankruptcy court, as well as costing you your retirement nest egg.
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Posted by Domenica Ginocchio on 01 Apr 2010