Bankruptcy is a very real way for Wisconsin residents to find debt relief. Depending on the type of bankruptcy chosen, debtors may be able to completely eliminate debts, either by liquefying their assets or by setting up and successfully completing a repayment plan. However, those considering bankruptcy may be concerned about which assets they may lose. This is a legitimate concern, as many wrongly believe that a bankruptcy will leave them penniless, with nothing left on which to survive.
In fact, the United States Bankruptcy Code provides several bankruptcy exemptions. These are assets that cannot be touched during the process, and they stay intact once the process is completed. There are many exemptions, but one of the most important pertains to retirement accounts. Under federal law, retirement accounts that are exempt under certain IRS sections are also exempt from bankruptcy proceedings.
Additionally, accounts that have a favorable determination under section 7805 of the IRS Code are exempt. If the account has been deemed unfavorable under that same section, then the account may still be exempt for bankruptcy purposes so long as it is in substantial compliance with IRS laws or the noncompliance is not caused by the debtor.
This is just a small sampling of how the bankruptcy laws seek to give individuals another chance at financial health. Though there is a lot of negative connotation associated with bankruptcy, those who successfully file for it may be able to rid themselves at debt while still securing their financial future. With this in mind, those facing overwhelming financial challenges should consider discussing the matter with an attorney who can help guide them through the process.
Source: Legal Information Institute, “11 U.S. Code § 522,” accessed Jan. 25, 2016