Retirement Account Protections
Most Retirement Accounts Are Protected (Exempt)
Many people are under the false impression that you lose everything you own when filing bankruptcy. Many people particularly worry about their retirement accounts. Bankruptcy exemptions can protect the property you need for day to day life.
Most importantly, Congress overhauled the bankruptcy laws in 2005, and thereby protected almost all ERISA-qualified retirement accounts and pension plans.
Chapter 7: You might have to give up some property in this chapter, however; most people keep all their property. Most important, your retirement accounts are safe.
Chapter 13: Chapter 13 Plans are developed around how much you can repay your creditors in three to five year. Since your retirement accounts are exempt, the balance of the accounts are not taken into consideration when developing the plan.
Entirely Exempt Retirement Accounts
ERISA-qualified retirement accounts and pension plans are exempt, such as:
401(k)s;
403(b)s;
IRAs (Roth, SEP and Simple), exemption limited to $1,283,025/person;
Keoghs;
Profit-Sharing Plans;
Money Purchase Plans; and
Defined Benefit Plans.
Payments from Retirement Plans Are Not Exempt
Retirement funds remain exempt while in the retirement account. Once you begin receiving payments from the accounts, the funds received are not exempt. Therefore, if you are approaching retirement age, or are about to start receiving mandatory disbursements, and you are considering your bankruptcy options, some planning may be necessary.
Chapter 7: Payments from a pension or retirement account are consider income conducting your Chapter 7 means test qualification. The bankruptcy court cannot take any retirement benefits that you need for your support and maintainance, but excess funds could be use it to repay your creditors.
Chapter 13: Chapter 13 Plans take into consideration payments from a pension or retirement account when determining how much you can repay your creditors in three to five year.
This office is a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code.
Please call 216.225.9181, Email, or use the contact form to schedule a consultation.