Most people go to great lengths to avoid bankruptcy. Retirement savings accounts are one of the last wells people tap into before filing bankruptcy. While working through debt problems is desirable, it should not come at the expense of your long term well being. Find out why you should never use your retirement savings to avoid bankruptcy.
When people file for bankruptcy in Minnesota, some of their property may be protected from garnishment or repossession. Minnesota statute 550.37 lists types of property that are exempt from collection efforts by debt collectors or creditors. Some of this protected property is fully protected while other types are only protected up to a certain dollar amount.
While a person is filing for bankruptcy in Minnesota, the debtor may claim their homestead as an exemption. This means that the house that is occupied by the debtor and the debtor's family and the land where the house is situated will be protected from seizure or sale.
Minnesota residents who file for bankruptcy protection are able to keep certain assets because they are exempt. Those assets are protected by law from being sold to pay creditors. The exemptions fall into categories, such as motor vehicles and clothing, with a maximum dollar amount allowed for each category. Filers are free to use the Minnesota exemptions or they can elect to use federal exemptions.
Though some people may be afraid that they will lose everything if they file for personal bankruptcy, this is usually not true. There are some assets that creditors do not have access to in the course of the bankruptcy process. While exemptions vary from state to state, retirement accounts are generally protected. The U.S. Supreme Court recently clarified the treatment of retirement accounts that were received as an inheritance.