Senior Citizens and Bankruptcy: Are Retirement Funds Exempt?

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Question: If a senior citizen files bankruptcy are retirement funds exempt?

Answer: Most retirement accounts are exempt in bankruptcy. Almost all tax-exempt retirement accounts are protected in bankruptcy, including 401(k)s, IRAs, and defined benefit plans. IRAs and Roth IRAs are exempt up to $1,245,475 (this amount changes every few years); all others are exempt regardless of value. 

If you file for bankruptcy under Chapter 7, this means the trustee can't touch your retirement funds. If you file for bankruptcy under Chapter 13, this means your retirement funds don't count when determining how much you have to pay into your Chapter 13 repayment plan. The exemption for retirement accounts is a significant benefit, whether you are already drawing down those funds or are simply trying not to touch them until you reach your golden years. 

To learn more about senior citizens and bankruptcy, see our article Should Senior Citizens File Bankruptcy?

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