One misconception held by many is that filing for bankruptcy will cause you to lose everything you own. While in some bankruptcy cases you may risk losing some assets to creditors, much of your property can be protected through bankruptcy exemption laws. Each state varies on the amount of property that is protected during bankruptcy, but the federal exemption laws offer uniform protection for anyone who claims these exemptions.
Keeping Your Money
Aside from protecting one’s home and vehicle, up to a specified value, federal bankruptcy exemptions allow for much of one’s personal funds to be protected as well. Many people fear losing their retirement or government benefit funds to the hands of creditors.
The good news is that these funds are generally untouchable. The federal exemption laws allow for retirement funds, pension, profit sharing, stock bonus plans, IRAs, and 401(k)s to be exempt from seizure in the bankruptcy process. However, there is a cap placed on IRA funds, which is limited to $1,095,000.
Life insurance policies and funds are also exempt during bankruptcy. Life insurance policy payments required to care for a dependent are exempt, as well as payments that are paid on policies of a deceased family member. Unemployment, disability and Social Security benefit payments are also all exempt from seizure in bankruptcy.