Can You Declare Bankruptcy and Keep Money?
The short answer here is: Yes. The longer answer is: It depends on where the money is. Bankruptcy is designed to alleviate an untenable financial situation, not reduce you to abject poverty forever. You don’t have to give up everything when you file for bankruptcy. You can keep any property that qualifies as an exempt asset—including cash. Because bankruptcy is nation-wide, there are certain exemptions that have been established at the federal level. Some states only allow those federal exemptions, others require you to use the state exemptions. Wisconsin is one of only 16 states that allows you to choose. In this blog, we’ll explore ways in which you can keep your money when you declare bankruptcy.
Wisconsin State Exemptions
When using the Wisconsin state exemptions, your personal property is exempt up to $12,000, as are your bank deposits up to $5,000. Those amounts are doubled if you are filing jointly. College savings accounts or tuition trust funds will not be touched. Only some retirement accounts apply, though. It really requires professional analysis to make the best choice.
Federal Nonbankruptcy Exemptions
If you choose to use Wisconsin state exemptions, you cannot use federal bankruptcy exemptions. However, there are federal nonbankruptcy exemptions that you will still have access to. These include retirement benefits, death and disability benefits, survivor’s benefits, and other miscellaneous exemptions. Each has its own qualifications. Here is information about some of them:
Federal bankruptcy exemption for retirement funds in pension plans and individual retirement accounts is available to all debtors, even those in “opt-out” states who would not otherwise be permitted to claim the federal exemptions. The maximum dollar amount for this exemption adjusts every three years, and currently the maximum aggregate value of funds in retirement accounts that may be exempted is $1,512,350.
Some education funds are simply not considered part of the bankruptcy estate; they are held to be separate from the debtor’s other property and assets. This applies to funds placed in an education IRA, a section 529 tuition savings program, and a qualified ABLE account. However, the money must have been put there between 365 and 720 days before the bankruptcy petition was filed.
Here are some of the things that can be excluded from your bankruptcy estate: wages, unemployment benefits, public assistance, cash or bank balances, and personal injury proceeds. Also, you are able to keep Social Security proceeds, though there are special conditions that apply. That money needs to be held in a separate bank account as it loses its protection when placed in an account where there is income from other sources as well.
In summary, there are a number of exemptions for bankruptcy, so you can definitely declare bankruptcy and keep money and other assets. The experts at Burr Law can help you to retain absolutely everything you can while still obtaining all the benefits that bankruptcy brings. Your particular situation will be examined carefully and we will find the best solution for you.