How to Protect Your Retirement Accounts During Bankruptcy in Texas
What Happens to Your Retirement Accounts if You File for Bankruptcy in Texas?
If you’re staring down bankruptcy in Texas, your mind may race with worst-case scenarios. One of the most common questions we hear is, “Will I lose my retirement savings if I file for bankruptcy?” The good news: Texas law and federal statutes provide some of the strongest protections for retirement accounts anywhere in the U.S.
In most cases, 401(k), IRA, pension plans, and other tax-deferred accounts are exempt from bankruptcy proceedings. But there are nuances depending on how the account was structured, how much you’ve saved, and what type of bankruptcy you file.
So let’s break down exactly what’s protected, what’s not, and what steps you can take to protect your hard-earned retirement funds.
Which Retirement Accounts Are Protected During Bankruptcy?
Wondering, “Are all retirement accounts safe during bankruptcy in Texas?” Here’s a quick list of the most common types and their exemption status.
Fully or Mostly Exempt Accounts
-
401(k) plans – Fully exempt under ERISA and Texas laws.
-
403(b) plans – Protected like 401(k)s.
-
IRAs and Roth IRAs – Protected up to $1,512,350 (as of 2025, subject to cost-of-living adjustments).
-
Keogh plans – Generally protected if the plan is ERISA-qualified.
-
Government and teacher pensions – Exempt under both federal and state laws.
-
Social Security income – Not considered part of the bankruptcy estate.
Partially or Conditionally Protected Accounts
-
Inheritances of retirement funds – May be subject to creditor claims unless properly structured.
-
Non-qualified annuities or self-managed funds – These may not be fully exempt unless specific rules apply.
-
Withdrawn retirement funds – Once money is removed from the account, it may lose its protected status.
Quick Tip: Avoid cashing out or transferring retirement funds before filing. Withdrawals can convert protected assets into non-exempt cash.
Texas Exempt Property Guide – Read the Texas Property Code on exemptions.
How Does Bankruptcy Work with Retirement Accounts in Texas?
Bankruptcy in Texas follows a two-path system: Chapter 7 (liquidation) and Chapter 13 (repayment).
Chapter 7: Do I Have to Give Up My Retirement Accounts?
No. In most cases, your retirement accounts remain untouched in Chapter 7 thanks to Texas’s generous exemption laws and federal ERISA protections.
Unless you’ve engaged in fraudulent transfers or withdrawn funds unnecessarily, your retirement savings will remain fully protected.
Chapter 13: Will My Retirement Impact My Repayment Plan?
Retirement funds are generally not counted as part of the disposable income that’s used to determine your monthly repayment. However, retirement contributions—especially if they’re new or suddenly increased—might be scrutinized. Courts may ask, “Is this contribution necessary, or an attempt to shield assets?”
Pro Tip: Stay consistent with contributions and avoid making large last-minute deposits before filing.
What’s the Best Way to Protect Retirement Savings During Bankruptcy?
Here’s a step-by-step guide if you’re wondering, “How do I keep my retirement funds safe during a Texas bankruptcy?”
1. Inventory Your Accounts
Make a list of all retirement and pension accounts. Include:
-
Account types (IRA, 401(k), etc.)
-
Current balances
-
Contribution history
2. Keep Funds in Their Original Accounts
Don’t withdraw or roll over accounts without legal advice. Even transfers from one qualified plan to another can cause problems if not done properly.
3. Work with a Bankruptcy Attorney
Navigating exemptions, especially if you have mixed accounts or recent contributions, requires guidance. A specialized firm like Kisch Consumer Law can help maximize your exemptions and reduce risk.
4. Avoid Fraudulent Transfers
Don’t transfer funds to family or friends in hopes of hiding them. Courts have powerful tools to reverse transactions and impose penalties.
Why Choose Kisch Consumer Law to Help You?
Searching for, “Why choose Kisch Consumer Law in Texas bankruptcy cases?” Here’s what sets them apart:
-
Focused on Consumer Protection – They specialize in protecting everyday Texans, not corporations.
-
Data-Driven Strategy – Kisch builds a custom, fact-based approach to protect your most important assets.
-
Experience with Bankruptcy and Retirement Law – They know how to secure exemptions others miss.
-
Human-Centered Guidance – You’re not just a case number. You’re a future retiree who deserves peace of mind.
FAQs About Retirement Account Bankruptcy Protection in Texas
Can creditors touch my 401(k) during bankruptcy?
No. ERISA-qualified plans like 401(k)s are completely exempt from bankruptcy proceedings.
Is my IRA protected in full?
Mostly. IRAs and Roth IRAs are protected up to about $1.5 million as of 2025. Any amount beyond that could be exposed to creditors.
What if I already withdrew from my account?
Withdrawn funds lose their exempt status. They become cash, which may be seized depending on your exemptions and filing chapter.
Can I keep contributing to retirement while in bankruptcy?
Yes, but be cautious. Sudden increases in contributions before filing could raise red flags, especially in Chapter 13.
Does Texas have stronger protections than other states?
Absolutely. Texas is one of the most debtor-friendly states when it comes to retirement account protection.
Final Thoughts: Don’t Let Bankruptcy Rob Your Retirement
Look, filing for bankruptcy can feel like a financial fire drill. But losing your 401(k)? That’s not on the agenda.
Texas law has your back—as long as you play by the rules, stay transparent, and get expert guidance. Whether you’re planning for the long haul or facing urgent debt pressure, your retirement doesn’t have to be sacrificed.
And let’s face it, nobody wants to work at a coffee shop at 78 just to buy cat food (unless you love coffee and cats—that’s a different story).
So if you’re wondering what the next best step is, it’s this:
Talk to the team at Kisch Consumer Law and protect the nest egg you’ve worked your whole life to build.