Written by San Mateo bankruptcy, Jeena Cho

Today I want to continue talking about some of the myths about bankruptcy that are flying around. I find that these myths are often the reasons given to me when I ask my clients why they waited so long, or are still hesitant to consider bankruptcy.

Some are afraid of doing so because they fear they’ll be forced to use their retirement savings to pay their creditors. This is a scary concept for those who don’t have much saved to begin with and is especially worrisome to those who are close to retirement.

Believe it or not, most retirement savings accounts are not impacted by bankruptcy filings. There are two reasons for this. One is that the account, like an ERISA, is not considered part of your estate until you actually draw from it. The other reason is that you may simply have a form of retirement savings, like an IRA or Keogh plan, that is considered exempt under California exemption laws.

The other mistake I’ve seeing recently is people cashing out their retirement in an effort to pay off credit card debt. This is a big no-no. Retirement is money you need to retire on. Second, cashing out your retirement early can have severe tax consequences and new taxes are not dischargeable through bankruptcy.

Talk to your San Mateo bankruptcy attorney about your retirement plan and any other assets you are concerned about losing. You may be surprised to find you won’t lose as much as you originally imagined – if anything at all.

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