If you’re like many people who file for Chapter 7 bankruptcy, you may not have much in the way of non-exempt assets. In Utah, as in other states, the law allows you to protect your home, your vehicle and some other types of property up to a certain value. As a result, you shouldn’t have to worry about the court selling your assets and using the cash to pay your creditors.
But what about the funds in your bank accounts and retirement accounts? Will the bankruptcy court take that money, or is it exempt?
Knowing what to expect when you file for Chapter 7 bankruptcy can help you prepare for the process and avoid costly mistakes. Below, the legal team at the Law Office of Davis & Jones explains what typically happens to financial accounts in a Chapter 7 case.
If you have cash in a checking or savings account, you likely will not be able to keep it all – but the bankruptcy court may not take the entire balance.
Some funds, including disability benefits, pension earnings, life insurance proceeds and unemployment compensation, may be exempt under Utah bankruptcy law. You may also be able to keep a portion of your wages.
Be aware, however, that your bank may freeze your accounts upon learning of your Chapter 7 bankruptcy claim. Also, if you have a loan through your bank and you’re behind on payments, the money in your checking and savings accounts may be used to cover some or all of the amount you owe.
In most cases, 401(k) retirement account funds remain untouched by the bankruptcy court. This applies whether you have a 401(k) plan through a current or former employer, or both.
However, while most 401(k) accounts are safe in Chapter 7 bankruptcy, some are not. If yours isn’t qualified under the Employee Retirement Income Security Act (ERISA), some of the funds may be vulnerable.
If you have traditional or Roth IRAs, you should know that the bankruptcy court could seize some of the funds – but the chances of that happening are slim.
The exemption amount for these retirement accounts is quite generous. Currently, bankruptcy law allows you to protect well over a million dollars in your IRA. If you don’t have that high of a balance – and few Utah residents do – your retirement savings should remain intact when you file for Chapter 7 bankruptcy.
For the facts on bankruptcy law, turn to an experienced legal professional. At the Law Office of Davis & Jones, P.C., serving the greater Salt Lake City area and the surrounding northern Utah communities, our team is well-acquainted with the state and federal laws and can answer all of your Chapter 7 bankruptcy questions.
Contact the Law office of Davis & Jones today and schedule a free bankruptcy attorney consultation to learn more about how filing for Chapter 7 bankruptcy will affect your finances.