In most cases, bankruptcy is the result of an illness, accident or unsuccessful business. Many people believe that they will lose all of their assets if they file bankruptcy; this is not the case. A good bankruptcy lawyer can help you to identify assets that the court will allow you to keep, and thus help you to make a rational decision about whether filing bankruptcy is right for you.
Here is a short overview of some of the types of assets that you may be able to keep in Chapter 7 bankruptcy.
401k and Other ERISA Accounts
The entire value of 401k, 403b and other ERISA accounts are exempt from bankruptcy, regardless of whether you file under federal or state rules. If no fraud has occurred, you can keep millions of dollars in these types of accounts.
Traditional and Roth IRA Accounts
Traditional and Roth IRA accounts are exempt in bankruptcy up to a certain limit. In 2005, congress defined that limit as $1 million; the limit increases with inflation every year. Currently, the Traditional and Roth IRA limit is about $1.3 million.
Some of the value of your home may be exempt in bankruptcy. Massachusetts allows debtors to exempt up to $500,000 of their home equity in a bankruptcy filing. If a homeowner has not filed for a Declaration of Homestead, this exemption may be reduced to $125,000.
Understanding which assets are exempt is important to deciding whether a bankruptcy filing is right for you. Exemptions may not apply if you have debts related to spousal support, child support or some other situations. This article is not legal advice; if you need help determining which assets might be exempt in your situation, please contact us.