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Are retirement savings at risk during an Oregon bankruptcy?

On Behalf of | Mar 12, 2024 | Chapter 7 Bankruptcy

Someone who is contemplating a personal bankruptcy filing has likely endured a lengthy period of financial instability. They may have experienced a sudden drop in income or a massive increase in monthly household expenses. Especially in scenarios involving low income levels, a bankruptcy filing might seem like the best solution for households with high levels of debt. Anyone at or below the median income level for their household size in Oregon might be able to pass the means test that determines whether they qualify for Chapter 7 bankruptcy proceedings.

Even if someone knows that they should qualify for a Chapter 7 filing, they may worry about the consequences of attempting to discharge their eligible unsecured debts. A Chapter 7 bankruptcy might require the liquidation of certain assets before the courts discharge someone’s debts. Are retirement savings at risk of liquidation during a Chapter 7 bankruptcy in Oregon?

Some retirement savings have protection

A Chapter 7 bankruptcy helps someone regain control of their finances by ending aggressive collection efforts and diminishing their financial responsibilities. Those benefits could prove less useful if someone had to sacrifice literally all of their personal holdings to acquire a discharge.

Therefore, both state and federal law outline certain exemptions that can protect personal property during a bankruptcy. Exempt property is not at risk of liquidation. Federal and Oregon state exemptions include rules that allow for the protection of certain retirement accounts. Filers provide an inventory of their assets to the courts and can exempt some crucial personal resources from liquidation.

For those who decide to use Oregon estate exemptions, the basic guidelines relate to the type of accounts used for retirement savings. Many tax-deferred accounts related to someone’s employment qualify for exemption under Oregon bankruptcy rules. If the Employee Retirement Income Security Act of 1974 (ERISA) applies to the account in question, then the worker might be able to exempt those savings from liquidation during their bankruptcy filing.

Employer-sponsored pensions, 401(k)s and other types of accounts can sometimes benefit from full protection from liquidation during a Chapter 7 filing. There are also federal exemptions that can protect retirement accounts. Learning about bankruptcy exemptions can help an individual contemplating bankruptcy determine if their retirement savings might be vulnerable during Chapter 7 bankruptcy.

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The Law Office of Kim Covington, is a woman owned debt relief agency, and I have helped families, individuals and small businesses, file for bankruptcy relief under the U.S. Bankruptcy Code, for over 24 years.