How Does Bankruptcy Affect Retirement Accounts For Ohio Residents?

Exempt V.S. Non-Exempt Accounts

Before filing for bankruptcy, it is important to understand which retirement accounts are exempt and which are non-exempt. Understanding the difference is especially important if you are going to file Chapter 7 bankruptcy.

What Is Exempt

An exempt account is protected under the law, and it cannot be included in your bankruptcy process. This means that it is protected from creditors’ payment recovery efforts. The below are exempt from bankruptcy in Ohio:

• ​401 k
• 403 b
• Pension Plans
• Profit Sharing Plans
• Traditional & Roth & Rollover IRAs

What is Not Exempt

A non-exempt account is not protected during bankruptcy and can be affected during payment recovery efforts. If you are filing for Chapter 7, your assets will be taken and sold by a trustee. This money will then be used to repay creditors. The below are not exempt from bankruptcy in Ohio:

• Inherited IRAs
• Simple IRAs
• SEP IRAs
• Any retirement funds you have already withdrawn

How Your Non-exempt IRA Accounts Are Utilized In Bankruptcy

How your non-exempt retirement account is used in bankruptcy solely depends on the type of bankruptcy you file for. When you first file for bankruptcy, your net worth will be determined to help figure out how much you can repay your creditors. Your net worth calculation will include all of your assets. This includes your home, any vehicles you own, any money you have in the bank, and non-exempt retirement savings. Once your net worth is determined, the court will settle on your bankruptcy plan. From there, your trustee will help you set up any payment that you have agreed to to help you pay back your creditors.

The Differences Between Chapter 7 And Chapter 13 Bankruptcy

Chapter 7 and Chapter 13 bankruptcy are two different solutions that can help you find financial stability. Chapter 7 allows you to have a clean slate quickly by liquidating your belongings and paying off your debt immediately. With Chapter 13 bankruptcy, you are allowed to keep your belongings, and the court will structure a repayment plan that will allow you to slowly pay off your debts. This protects your belongings and allows you to keep your belongings while you make payments over time.

Protecting Your Assets During Chapter 7 Bankruptcy

If you are filing for Chapter 7 bankruptcy, your trustee will take any belongings that have value, liquidate them, and use them to pay back your creditors. One way to protect your account if you are filing for Chapter 7 bankruptcy is to hold off on making any withdrawals from an exempt retirement account until after your filing is complete. Any withdrawn money will be used in your net worth assessment and will be used as payment to creditors. If you are able to withhold from withdrawing, you can save yourself from liquidating the savings that you have worked years on building.

How To Protect Your Accounts From Creditors

There are a few ways that you can protect an account from being considered as an asset when you file for bankruptcy. One of the best ways to keep your retirement safe is not to withdraw cash from your savings. These withdrawals are considered assets once they are taken from the account and will be applied to your net worth during your bankruptcy filing process.

Protecting Your Inherited Accounts

If you have inherited an IRA, there are a few things you can do to protect them and make them exempt before you file for bankruptcy. If you have inherited from a spouse, you can roll their savings into your own savings. Once it is rolled over into a traditional IRA, it will be protected from bankruptcy. If you have inherited savings from non-spouses, you can work with a bankruptcy attorney to protect them. There are ways that you can use trusts and other estate planning strategies that will make these funds protected from a bankruptcy filing. An attorney will help you determine the best way to safeguard your money so you are able to keep as much of your belongings as possible.​

Consult An Attorney Before Filing For Financial Relief

Understanding the process and the different ways you can protect yourself will allow you to find your financial freedom. Understanding if you have an account that is or is not exempt will help you plan for the process of bankruptcy. It is important to consult with a bankruptcy attorney before you file. An attorney can help you determine which assets are exempt and help you come up with a plan on how to protect other belongings you may have. They will help guide you in the right direction and ensure all of the necessary paperwork is correctly filed so you can be one step closer to financial freedom. It is important to make informed decisions before filing for bankruptcy. The attorneys at Jump Legal are ready to support you in any way you need.

Jump Legal Will Safeguard Your Savings

Jump Legal makes it easy to understand the intricacies of filing for bankruptcy so you can make an educated decision and find financial freedom. Being in a world of endless bills and debt is already stressful. Let the attorneys at Jump Legal take the burden and the intricacies of filing for bankruptcy off your shoulders. We are here to help you and make sure all of your belongings and accounts are protected prior to filing. This will ensure that you are set up for financial freedom and you will be protected during the filing process. We are here to answer any questions you may have. Give Jump Legal a call today and let us know how we can help you and your family find financial relief.​

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