Law Office of Judith A. Descalso Law Office of Judith A. Descalso

How does a bankruptcy filing impact your retirement funds?

Everyone looks forward to retiring one day and being able to spend their leisure time in whatever manner they see fit. When Escondido residents work for 45 years or more - saving money for retirement along the way - they are usually happy when the day comes that they can actually sit back and relax. But what if financial troubles pop up along the way? What if instead of carefully saving for retirement for years, with a well thought out plan, the household finances somehow get thrown out of whack? Can a bankruptcy filing have any kind of impact on retirement savings?

The quick answer, fortunately enough, is that filing for bankruptcy usually will not have a significant impact on retirement savings. For the most part, no matter how an Escondido resident saves for retirement - whether the funds are in a 401(k), individual retirement account or other savings mechanism - those funds are usually part of a class of bankruptcy exemptions.

For example, many of our readers who are familiar with previous posts here know that in a Chapter 7 bankruptcy a person's assets are liquidated - or sold - and the proceeds are used to pay down debts owed. Any remaining debt after the non-exempt assets are liquidated is then discharged. However, in a Chapter 7 bankruptcy filing, a person's retirement accounts are not part of the assets that are considered when the liquidation occurs.

Escondido residents work hard for their retirement savings. It can be a comfort to know that these funds won't be a factor in a bankruptcy filing.

Source:, "11 U.S. Code ยง 522 - Exemptions," Accessed April 9, 2015

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