Did you know you can keep your 401 (K) retirement account when you file for bankruptcy?
You can keep all of it, in fact.
Which brings up one of the most fundamental rules of bankruptcy law practice — don’t raid your retirement accounts to pay bills if you think you might have to file for bankruptcy.
Retirement accounts are typically 100% exempt in a bankruptcy case. (This goes for IRA accounts as well as 401(k)’s ). Creditors can’t touch them. No amount of motions filed with the bankruptcy court will change the law. So it is a very bad move to vaoluntarily raid your account to pay off bills.
Instead, you may be able to file for bankruptcy, eliminate all or most of your debt, and still keep your retirement savings. In one fell swoop, you could be ahead of most people in saving for retirement, instead of being behind constantly.
So this is a real no-brainer, as they say. Don’t raid the 401 (k) without talking to a bankruptcy attorney first. If you are in or near the Merrimack Valley and are thinking about bankruptcy, give me a call. The number is 978-975-2608, and I am in on almost every workday.
By Doug Beaton