There are many issues that Ohio residents may need to be aware of when it comes to how filing bankruptcy may impact their finances. The good news for those with a 401(k) or an IRA is that money inside of those accounts are often off-limits to creditors. The only exception is that the IRS may levy those funds if there are back taxes owed.
However, even in a situation where a person owes back taxes, money inside of an account won’t be levied until an individual actually receives it. It is important to note that the IRS could impose penalties on the past due balance until it is paid, which could significantly increase the amount owed.
In most cases, funds within a profit sharing or employee stock option account are not exempt from creditors unless they qualify under ERISA. On the other hand, 529 savings plans are exempt under Ohio law (this, of course, should not be abused).
Those who are seeking help keeping up with their bills may find it beneficial to file for bankruptcy. This may make it possible to have debts discharged or reorganized. Most debts such as credit card balances, mortgages or auto loans can be handled in a bankruptcy proceeding. An attorney may be able to talk more about the benefits of filing for bankruptcy such as an automatic stay of collection activities.