Under the bankruptcy law, whether you use the state or federal exemptions, many types of tax-exempt retirement accounts are exempt in bankruptcy. IRA’s, profit sharing and money purchase plans are all exempt. Roth and traditional IRAs the exemption is limited to $1 million per person. This amount is adjusted every four years.
What they mean by exempt is that the retirement account can not be seized to satisfy creditors’ demands. If you have a large number of assets, creditors may pressure you to liquidate your retirement account to pay your debt. To protect your accounts, you may want to file bankruptcy to protect your assets.
If you are thinking of cash in your 401K to pay off your debts, take into consideration if you have enough years in your working life to repay your retirement account. You don’t want to go into your retirement years with no savings or having to work long past the years you wanted to to make ends meet. While the pressure to pay off the debt may be strong, you have to consider your future. Filing bankruptcy can eliminate your unsecured debt and give you a fresh start.
If you need help getting out of debt, and want to protect your retirement account, contact a Cincinnati bankruptcy attorney to discuss your options.