The bankruptcy process does not have to take all of your assets from you. There are many exceptions and rules set up to protect certain types of assets. Is a retirement account like a 401(k) among those protected funds? They can be, and a Montgomery County Chapter 13 bankruptcy lawyer from our firm can tell you more.

Will I Lose My 401(k) Retirement Account in Bankruptcy?

The simple answer is no. Some types of assets are not taken away from bankruptcy filers. A 401(k) is a type of retirement account and many accounts like this are actually protected during bankruptcy. So if you are facing down a mountain of debt and worried that filing for bankruptcy will result in your retirement funds being drained, you shouldn’t be.

Does the Chapter of Bankruptcy Matter?

It doesn’t. Individuals usually file for either Chapter 7 or Chapter 13 bankruptcy. Whether you have to liquidate your assets or make a payment plan, a retirement account like a 401(k) should be protected during either process. Our lawyers can tell you more about which assets can be protected and which might have to be sold off to satisfy creditors.

Can I Just Use My Retirement Account to Pay Off My Debt?

If you have a 401(k) or another retirement account that is full of money, you may be wondering if it is worthwhile to use this money to pay down debts. Unfortunately, there are drawbacks to doing this. You are really not supposed to pull money out of accounts like these until you are retired. Take the money early, and you’re sure to face issues like:

  • Tax penalties for withdrawing money before you reach a certain age
  • Early withdrawal fees
  • The loss of interest you would have earned over time

We should also note that a withdrawal from a 401(k) is taxed like income, so that’s more money you have to worry about losing. It’s generally not a great idea to use this money to pay off debts if you have not reached retirement age, so we recommend talking to an attorney before taking any drastic actions.

Do I Need an Attorney?

Filing for bankruptcy on your own can be tough. When you work with a lawyer from our firm, we can make sure that you have all of the documents and information that you need and that everything is filed properly. Making mistakes during this process can add stress and additional financial headaches to the process, so having an experienced attorney to guide you through is a good idea. We can also tell you which form of bankruptcy is best for you and what kinds of assets can be protected when you file.

Schedule a Consultation

So if you’re considering filing for bankruptcy, don’t go it alone. Contact Mudrick & Zucker to set up a consultation with our team. We would like to tell you more about how our lawyers can be of assistance during the bankruptcy process.