Some people call Chapter 7 bankruptcy liquidation bankruptcy. This name comes from the potential requirements to sell off or liquidate assets. The trustee overseeing the bankruptcy filing may require the liquidation of certain assets to repay creditors before the filer qualifies for a discharge.
People who qualify for Chapter 7 bankruptcy may worry about the potential loss of their resources. They don’t want to eliminate debts at the cost of their entire portfolio of assets. People tend to be especially concerned about
Retirement accounts may represent years of careful saving. Are people at risk of losing their retirement savings in a Chapter 7 bankruptcy?
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Retirement savings are often exempt
People can protect or exempt certain assets from liquidation during bankruptcy. Both federal and Ohio state rules allow for the preservation of retirement funds. Generally speaking, any pensions or savings subject to the protections of the Employee Retirement Income Security Act of 1974 (ERISA) are not at risk of liquidation.
Additionally, filers can typically protect the funds they set aside in 401(k)s and 403(b)s. IRA accounts are also protected by exemptions, although there may be limits to the total amount of funds that people can preserve in an IRA. Those concerned about their financial stability during retirement can theoretically eliminate their debts in a Chapter 7 bankruptcy without losing their savings.
Reviewing personal holdings with an attorney can help people determine if any of their retirement savings are at risk in a Chapter 7 bankruptcy case. Most filers can preserve all of their property without needing to liquidate assets to qualify for a discharge.