Much of the negative feeling towards bankruptcy revolves around not knowing what will happen if you file chapter 7 or chapter 13 bankruptcy. As a result, one of the biggest questions surrounding the issue of whether or not to file bankruptcy in Sacramento California is what happens to investments during bankruptcy. The answer depends on which type of bankruptcy you file, as some investments are handled differently in Chapter 7 than they are in Chapter 13.
Stocks in Bankruptcy
Whether you’ll hold onto stocks during a Chapter 13 bankruptcy will also depend on the amount of debt you are attempting to eliminate. If you can pay down your entire debt without selling all your assets you may be able to preserve your stock investments. As long as you can afford the approved repayment plan’s monthly payment to the trustee, you’ll be able to hold onto your stocks during the course of a Chapter 13 bankruptcy. If you can’t, you may have to sell those stocks in order to come up with the necessary funds for the payment.
Profit Sharing and ESPP in Bankruptcy
Employee Stock Purchase Plans and profit sharing plans are issued by companies as an added benefit. In a bankruptcy proceeding, these types of investments are generally not protected. When applicable, the bankruptcy trustee will seize these accounts as income in order to repay your creditors.
529 College Savings Plans in Bankruptcy
With 529 College Savings Plans in bankruptcy, whether they are secured from liquidation typically depends on the beneficiaries. If you or your spouse are the beneficiaries they generally aren’t protected from forfeiture when you file bankruptcy. However, if your children, grandchildren, or step-children are the intended beneficiaries, they are typically not considered your assets in a bankruptcy proceeding.
Investments that are safe in Bankruptcy
No matter which type of bankruptcy you file, investments such as pensions and 401(k) retirement accounts are safe from creditors. IRA accounts are protected in bankruptcy and in most states, life insurance policies up to a certain value are also considered exempt in bankruptcy, meaning they won’t be placed into the bankruptcy assets to be divided up.
Additional types of investment such as rental properties, jewelry, and collectibles may or may not be secured in a bankruptcy depending on what state you file bankruptcy in, the type of bankruptcy you file, and how much debt you are attempting to discharge. Talk to your bankruptcy attorney about what happens to your investments during bankruptcy. An experienced bankruptcy lawyer in Sacramento California will be able to give you an idea of what will happen and if anything can be done to retain your investments while discharging a portion or all of your unsecured debt.