What Should You Know About Retirement Plans and Filing for a Kansas Bankruptcy?

I often get this question, as do most Kansas bankruptcy attorneys, “How does bankruptcy effect my retirement?” I’ve heard this question from many of my clients before because they are concerned about the possibility of bankruptcy depleting their retirement accounts. I’ve also been asked this question by several financial planners because they are trying to advise their clients that are facing economic hardships. When it comes to retirement accounts and bankruptcy, there are three simple rules to follow: 1) In Kansas, your retirement is almost always exempt from the claims of your creditors in a bankruptcy, 2) Do not liquidate your retirement in an attempt to pay some or all of your creditors, and 3) Retirement accounts can actually help you protect otherwise non-exempt assets, such as cash, on the eve of filling.

Under Kansas bankruptcy law, most retirement plans are exempted from the claims of your creditors. Kansans bankruptcy allows you to discharge your debts without liquidating your hard earned retirement. Most retirement plans are exempt under Kansas and Federal bankruptcy code, but you will need to speak with a Kansas bankruptcy attorney or your financial planner to be certain as to the status of your particular retirement plan. Another common mistake, either made in under the pressure of growing debt or by bad advice, is liquidating your retirement in order to pay your creditors. There are several reasons to avoid this at all costs. One common reason is that most individuals cannot freely access their retirement. There may be fees, and more importantly, taxes that are incurred by accessing funds from your retirement. The taxes assessed are non-dischargeable in bankruptcy in most circumstances. Another reason to avoid this action is that most individuals only make a small dent in their debt and will still need to file bankruptcy; however, their retirement that they would have been able to retain is now liquidated. Finally, several individuals I’ve seen have paid down the wrong debt with their retirement and are now in a far worse situation in bankruptcy. By paying down loans like mortgages or car notes, you create equity in an asset that you will have to address in a Kansas bankruptcy court. You are basically paying for the asset twice by taking this action.

Very briefly, retirement planning can actually benefit you in a Kansas bankruptcy. Under Kansas law, you can convert non-exempt assets into certain types of retirements, or other exempt assets, on the eve of filing and avoid the seizure of those assets in bankruptcy. This is a complicated task so it would be best to consult with Kansas bankruptcy attorneys. Retirement planning is something that should be addressed in a thorough and well planned manner. The same rule applies as to how to use your retirement when you are facing financial difficulties. If you are considering accessing your retirement to address your debt, it would be best to consult with Kansas bankruptcy attorneys prior to taking any action.