Bankruptcy and Your Retirement
What happens to my retirement accounts if I file for bankruptcy in Washington State?
Our bankruptcy attorneys get this question a lot, especially during initial consultations. Here's what you need to know. Your 401(K), pension, and retirement savings are almost always protected in a Washington State bankruptcy. If you suddenly find yourself struggling to due to unforeseen job loss, a medical emergency, divorce, death of a spouse, or any other reason, the last thing you should do is raid your retirement accounts to stay afloat. This is a short-sighted strategy that often only holds off the inevitable collapse for a brief period.
Sadly, our debt relief lawyers often talk with potential bankruptcy clients after the damage has already been done. Your creditors and those nasty bill collectors who blow up your phone 24/7 will be more than happy to take your hard earned retirement, if you let them. Don't do it! If you are struggling with no real hope of turning things around, and if you can qualify, it's almost always better to just bite the bullet and file for bankruptcy as soon as possible.
We can almost always protect 100% of your retirement earnings. Don't let those nasty bill collectors get what it's taken you so many years to save and accumulate. Let our bankruptcy lawyers help you keep this hard-earned retirement, which you are almost certainly going to need one day down the road.
Now, many potential bankruptcy clients are actually shocked to learn that they will not have to liquidate or give up their retirement accounts if they file for bankruptcy protection here in Washington State. Many ask us whether or not we are sure. Yes, we are sure. And, there's a very good reason that the Federal and Washington State bankruptcy laws are structured to allow these kinds of accounts to "pass through" a bankruptcy filing.
If the bankruptcy process left you with no property when the case was over, the whole point of getting a financial fresh start would be lost. The laws recognize that a meaningful fresh start provides an honest, unfortunate debtor with enough property to move forward with his or her life. The property a debtor can keep in bankruptcy is “exempt.” And, it makes no sense to give someone a fresh start but then force them to essentially start over again from ground zero when it comes to their retirement.Nearly all retirement plans are totally exempt.
For an employer funded plan to be exempt, it has to be ERISA qualified. ERISA stands for the Employee Retirement Security Act. Our bankruptcy lawyers can help you easily determine if your retirement is an ERISA qualified plan. In actuality, nearly every retirement plan is an ERISA qualified plan. But, there are a few very limited and rare exceptions. Again, our debt relief attorneys are here to help. Just give us a call. You can also ask your HR department whether your plan is ERISA qualified. IRAs are also totally exempt.
If you or your employer is funding your retirement with an alternate method, you need to talk to a bankruptcy attorney about your options. Our Washington State bankruptcy attorneys are highly skilled at maximizing the amount of property you can keep.
Monthly contributions for a retirement plan or a retirement plan loan payment can be deducted from your budget in a Chapter 13 so you can keep funding your retirement plan or paying a loan back and pay less to certain creditors. But in a Chapter 7, you cannot deduct these payments to show you cannot pay any of your debts back.
Please see our other pages about the means test and the differences between Chapter 7 and Chapter 13 for a more detailed explanation of why someone might file a Chapter 13 repayment plan rather than the quicker Chapter 7, which does not involve monthly payments.
If you have questions about whether or not your retirement accounts can be protected in bankruptcy, you should get with one of Washington State bankruptcy lawyers and take advantage of our free, no obligation initial consultation. One of experienced and affordable debt relief lawyers can review your retirement, 401K, or pension plan and confirm that it will be protected.
Talk to an experienced bankruptcy attorney today!
You will not lose your retirement if you file for bankruptcy.
Get your retirement account questions answered now.