Can I File Bankruptcy and Keep My Retirement Account in Texas?

Your retirement savings represent years of discipline and sacrifice. One of the first things people want to know before filing is whether those accounts are at risk. The short answer: in Texas, your retirement accounts are almost certainly fully protected.

Retirement Accounts Are Exempt in Bankruptcy

Under both federal bankruptcy law and Texas state law, most retirement accounts are exempt from the bankruptcy estate — meaning creditors cannot touch them and they do not factor into what you owe. This includes 401(k) plans, 403(b) plans, IRAs (traditional and Roth), pension plans, profit-sharing plans, and most other ERISA-qualified retirement accounts. There is no dollar cap on the exemption for ERISA-qualified plans. IRAs have a federal cap of over $1.5 million per person — covering the overwhelming majority of individual savers.

Do Not Cash Out Your Retirement Before Filing

This is critically important: do not cash out your retirement account to pay creditors before filing bankruptcy. This is one of the most costly mistakes people make. You will owe income taxes and early withdrawal penalties on those funds — and the money will be gone. Money that was fully protected in bankruptcy becomes unprotected cash the moment it leaves the account. If you are considering draining retirement savings to deal with debt, speak with a bankruptcy attorney first.

Protect What You Have Worked For

The bankruptcy system is not designed to take everything you have. In Texas, your retirement is one of the most protected assets you own. Call my Houston office at (713) 366-1288 for a free consultation. Let’s make sure your retirement savings stay exactly where they belong.