The inability to meet financial obligations is something that many Texas residents experience at one time or another. Some people are able to recover from these circumstances, but others cannot. In those cases, they may consider filing for Chapter 7 bankruptcy, but worry they may lose the money in their bank and retirement accounts.
Losing these accounts could be a real concern for some people. Fortunately, a large number of filers do not have to worry. The goal of bankruptcy is not to leave an individual or family with no means of financial support. However, if the balance of a bank account is above a certain amount, at least a portion of it could be used to repay creditors.
Employment-based retirements accounts such as 401(k)s are ordinarily safe in a bankruptcy, but some exceptions exist. The key factor is whether the account complies with the requirements of the Employee Retirement Income Security Act. If it does, then it is more than likely safe. Roth and traditional IRAs are safe up to a certain amount through generous exemptions, but any amount over that amount could be used to pay creditors. Social Security benefits are protected to a certain extent, but a Texas resident may need to prove that certain monies in a bank account come from Social Security if other deposits come from other sources.
Before a Texas resident files for Chapter 7 bankruptcy, it makes sense to take a good look at any bank or retirement accounts in order to determine whether they could be vulnerable. If any monies do not fall under an exemption, choosing to file Chapter 13 or finding another debt relief option might work better. This is just one reason why many people struggling with their finances choose to discuss the matter with an attorney before taking any action that could prove more detrimental than helpful in the end.