You work your entire life with the dream of retiring and enjoying your golden years. You have spent your entire working life building a retirement fund so that you can live comfortably after retirement. Unfortunately, an unexpected event can threaten your dreams by creating a financial crisis. When this happens, filing bankruptcy may be the best solution to your financial problems. However, for many people who are contemplating a bankruptcy, the fear of losing assets is a major concern.
Will I Lose Everything if I File Bankruptcy?
There is a great deal of misinformation online about filing bankruptcy. Because bankruptcy myths are spread by word-of-mouth and online, many people hesitate seeking bankruptcy advice because they fear losing their property if they file bankruptcy. In reality, almost all of the people who file bankruptcy in New Jersey keep all of their assets while getting rid of most, if not all, of their debts. This includes keeping their retirement funds that are in their 401k account.
401k and Bankruptcy
One of the most common types of retirement plans is the 401k retirement savings plan. A 401k is an employer-sponsored retirement account that is funded with pre-tax dollars deducted from the employee’s wages. The employer forwards the funds to a plan administrator who invests the funds in a retirement account for the employee. In many cases, the employer matches up to a certain percentage of the employee’s contributions thereby increasing the employee’s ability to save for retirement. Because the employee is investing pre-tax dollars, it also works to decrease the employee’s tax liability by lowering his taxable income.
If you have worked for many years, you may have accumulated several thousand or even hundreds of thousands of dollars in your 401k retirement fund. The thought of losing this money because you are having financial problems is devastating. However, the United States Supreme Court has ruled that the money in a 401k retirement fund is not property of the bankruptcy estate. In other words, your retirement funds are protected from your creditors and the bankruptcy trustee. The bankruptcy trustee cannot use you retirement funds to pay your creditors if you file bankruptcy.
Consult a Bankruptcy Attorney before Using Retirement Funds to Pay Debts
Many people withdraw their retirement funds to pay debts when they do not have the income or other resources to pay those debts. For example, a person may withdraw his retirement funds to catch up past due mortgage payments to stop a foreclosure. However, he may have been able to save his home without using his retirement funds by filing a Chapter 13 bankruptcy.
Before withdrawing funds from your 401k account to try to resolve your debt problem, consult with an experienced bankruptcy attorney. In most cases, you can discharge your debts through bankruptcy while leaving your retirement funds safely in your 401k account.
Contact an Experienced Mount Holly Bankruptcy Attorney
Personal Approach, Professional Service, Affordable Payment Plans
The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
Contact our office at 609-267-5297 to schedule your free consultation to discuss bankruptcy and non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
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