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Are retirement savings protected during bankruptcy?

On Behalf of | Apr 25, 2024 | Bankruptcy |

The specifics of bankruptcy can seem confusing for anyone facing financial difficulties. It is also natural to wonder whether retirement savings are safe from creditors at this time.

Understanding how bankruptcy laws affect retirement savings is important.

Background about bankruptcy

Bankruptcy is a legal process designed to help individuals and businesses overcome debt. There are different types of bankruptcy, but the most common for individuals are Chapter 7 and Chapter 13.

Chapter 7 involves the liquidation of assets to pay off debts. Chapter 13 involves creating a repayment plan to settle debts over time.


Certain laws help individuals maintain a basic level of financial security during and after bankruptcy. This happens by shielding certain assets from liquidation.

Some retirement accounts are exempt property. Savings that are in qualified accounts like 401(k) plans and IRAs, also known as Individual Retirement Accounts, are not at risk. Laws protect these accounts up to a certain dollar amount during bankruptcy.

Recent contributions

However, there are exceptions to keep in mind. For instance, contributions made to accounts shortly before filing for bankruptcy may not be safe. This is especially true if they appear to be an attempt to hide assets from creditors.

Types of accounts

Additionally, not all types of retirement accounts receive the same level of protection. Inherited IRAs and retirement savings held in non-qualified accounts may not be as safe as traditional 401(k) plans or IRAs.

Retirement accounts are the product of years of diligent saving. By knowing these rules and more, individuals can make informed decisions about bankruptcy and their money without fear.


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