Investments, 401k And Pension Protections

What Types Of Investments Are Protected In Bankruptcy?

Exempt property in bankruptcy consists of assets that do not have to be included in a bankruptcy filing. In other words, a bankruptcy trustee cannot liquidate exempt assets to force a debtor to apply them to debts. Amounts differ from state to state, and between federal and state bankruptcy laws. However, the categories are similar, including:

• The homestead exemption
• Personal property up to a certain amount
• Retirement accounts and pensions that are not taxed before withdrawals during retirement
• Tools of a trade
• Wedding rings up to a certain value

Generally speaking, investments that are not taxed tend to be included in exempt property for bankruptcy purposes. For many workers, this means 401(k) accounts are off-limits to bankruptcy trustees. Individual retirement account (IRA) funds are also protected up to about $1.3 million.

For homesteads, home equity up to a limited amount is protected as follows:

• Per federal exemptions: Up to $25,150 (or double that amount for married couples filing for bankruptcy jointly)
• Per Michigan exemptions: Up to $40,475 (or $60,725 for debtors who are disabled or age 65 or older)

Individual circumstances and factors involved in each bankruptcy differ greatly. Personalized legal counsel is essential if you want to know how your investments may be affected if you file for bankruptcy. Gudeman & Associates, P.C., is a trusted boutique law firm providing southeastern Michigan-area clients with practical solutions to life’s problems such as unmanageable debt.

Is There A Way To Protect More Investments In Bankruptcy?

When you file for Chapter 7 bankruptcy, more of your assets are potentially at risk. However, you should get a customized analysis of your situation before concluding that Chapter 7 bankruptcy is not right for you.

Filing for Chapter 13 bankruptcy is typically a safer bet for people with substantial home equity and/or other investments that are important to keep. Through this type of bankruptcy, debts are reorganized and repaid affordably for a set period of time (usually three to five years).

When To Turn To A Legal Professional

The discussion on this webpage is generalized and may not apply to your case. If you are thinking about bankruptcy and investment assets, talk with a debt relief attorney.

At Gudeman & Associates, P.C., a 30-minute initial consultation is free. We will meet with you by phone, via a video conference or in person in our Royal Oak law offices. Call 248-546-2800 or email us to request a conversation with a bankruptcy lawyer. We are here to help you get through life’s challenges with confidence.