Filing for bankruptcy can be daunting, and many people often worry about what will happen to their nest egg in the process. But luckily, thanks to some extensive revisions to bankruptcy laws by the U.S. Congress, your retirement accounts will remain protected—with a few exceptions. Most types of retirement accounts are now considered exempt property, which means they will be untouchable to creditors unless you begin drawing from them.

Under the new law, all ERISA-qualified pension plans are protected. This means that whether you have a 401k, a 403b, Keoghs, a profit-sharing plan, or another ERISA-qualified plan, there is no limit on the amount of money in these accounts that will be exempt in bankruptcy proceedings.

If you have a regular IRA or Roth IRA, the amount of money in this account is exempt up to $1,283,025. This number is adjusted every three years to reflect any increases in your cost of living. Anything above this amount may be taken by the courts to pay your debts.

If you do begin drawing from your retirement account after filing for bankruptcy, that money will count as income. In bankruptcy, any income that isn’t necessary to support your living costs is considered non-exempt—including retirement income.

If you file for Chapter 7 bankruptcy, also known as liquidation bankruptcy, any income above what you need for your living costs will be taken by the courts to pay off creditors. If you have filed for Chapter 13 bankruptcy, your debts will be reorganized and put on a payment schedule. Any income that is more than your cost of living will be included in overall finances in Chapter 13 bankruptcy. That means if you are receiving retirement income, some of it may be used to pay off your debts.

Bankruptcy attorney Harry B. Zornow has been in practice for more than 30 years and is based in Hamilton, OH. He is a specialist in filing for bankruptcy, and he can help you get the debt relief you need. Call his office today at (513) 737-9770, or visit his website to learn more about what he can do to help you.