Filing for bankruptcy is a stress reliever for most people. There are a lot of negative associations people have when it comes to declaring Chapter 7 or Chapter 13, but they aren’t all true. If you’re in the right financial situation and handle paperwork accordingly, changing your economic status through bankruptcy can help save you from the constant worry of bills piling up, collections calls, and past fiscal mistakes.
Someone filing for bankruptcy does not lose everything. It is possible to erase a lot of credit card debt, but not student loans or child support payments. What you get out of bankruptcy is directly related to your personal circumstances. Some people lose property if they have the capital to spare, and some don’t. Federal and Louisiana state laws protect certain assets from bankruptcy proceedings. These exemptions include retirement accounts in many cases.
Retirement Account Exemptions in Louisiana
Retirement accounts protected under the Employee Retirement Income Security Act (ERISA), are likely exempt from bankruptcy. These accounts include 401(k)s, 403(b)s, SEP and SIMPLE IRAs, and defined benefit plans. In the case of traditional and Roth IRAs, the exemption, as of 2018, includes assets up to $1,283,025. Anything over that is non-exempt.
Other exemptions allowed under Louisiana law include pensions for certain city employees, school employees, certain court officials, municipal workers, local employees, voting registrars, sheriffs, firefighters, police officers, state employees, and teachers.
Retirement plans can be complicated and can vary drastically from one employer to another. When filing bankruptcy, the best practice is to contact the retirement plan provider and obtain details such as the current balance, penalties, and investment options. This information will help determine if all or part of the retirement plan is exempt.
Are There Other Things to Consider?
When a person is thinking about filing for Chapter 7 or Chapter 13 bankruptcy, it is essential to consider a few things:
- If a person is close to retirement, the repayment plan of Chapter 13 proceedings can cut into the monthly income after retirement.
- If a person owns property, lives on it, and its value is over $35,000, that person may lose it in the bankruptcy proceedings. However, there are circumstances such as catastrophic injury or terminal illness which would exempt the entire value of the property.
- It is not advisable to cash out a retirement account before bankruptcy. When they are cashed out, the proceeds become non-exempt which means they can a bank can seize those assets.
- If a person is already living off of their retirement accounts, the process becomes more complicated. The retirement accounts stay protected. However, when the retirement funds pay into the person’s bank account, those funds may be vulnerable to seizure.
Get Experienced Advice Before You File
Before a person proceeds to file for bankruptcy, it is imperative to speak with an experienced Louisiana bankruptcy attorney. The seasoned lawyers of E. Orum Young Law know the ins and outs of each situation and can review your case and tell you honestly where you stand. Our legal team has over 35 years of bankruptcy law practice to handle your bankruptcy questions and filings. Speak with us today at (318) 450-3192 to schedule your free case review and start restoring your credit and protecting your future.
