Many individuals make the mistake of withdrawing retirement savings to settle unpaid debts instead of filing for bankruptcy. In fact, most types of retirement funds have protection under the state and federal bankruptcy laws, so you can pursue debt relief without losing your life savings.
If you have experienced a job loss, illness or hardship that has affected your ability to meet your financial obligations, learn how bankruptcy will impact your retirement accounts.
Bankruptcy exemptions in Louisiana
Louisiana requires residents to use the state exemptions when filing for bankruptcy. Under these laws, you can keep exempt property worth below the maximum value, while the court can order you to sell nonexempt items to repay your creditors.
In addition to the retirement exemption, Louisiana allows you to keep up to $35,000 in equity in your primary home, or $70,000 if you and your spouse file for bankruptcy together. If you own a car, you can keep up to $7,500 in equity in the vehicle.
Louisiana provides an exemption for all qualifying annuity contracts, tax-deferred retirement plans and pensions. This includes:
- Defined benefit plans
- Money purchase plans
- Profit-sharing plans
- Keogh accounts
- Individual retirement accounts
- 401(k) plans
- 403(b) plans
It also includes pension benefits for Louisiana state employees, teachers and many municipal employees. The state does not provide an exemption for stock option plans, investment accounts and general savings accounts.
Although the court cannot seize retirement funds or pensions to pay creditors when you file for bankruptcy in Louisiana, the court can order you to use these funds to pay outstanding child or spousal support obligations.