What Will Happen to My Retirement Plan?
Under Chapter 7 bankruptcy, virtually all retirement accounts, including
pension plan funds, are exempt from creditors. Likewise, in Chapter 13
bankruptcy, retirement accounts are immune. Moreover, they will not affect
the amount you are required to repay unsecured creditors.
Importantly, the United Stated Supreme Court stated that any ERISA-qualified
plan, a plan that falls under the Employee Retirement Income Security
Act of 1974 (ERISA),
does not belong to the bankruptcy estate. It is for this reason retirement plans are safe when a person decides
he/she might file for bankruptcy.
Some ERISA retirement plans that are protected are:
- 403(b): also known as profit sharing plans
- 457(b): also referred to as deferred compensation plans
- Governmental plans
- Tax-exempt organizational retirement plans
Furthermore, most of these plans are protected up to an unlimited amount.
This means that if you decide to file for bankruptcy, not a single dime
can be taken from your retirement plans and distributed to creditors.
On the other hand, non-ERISA plans are also covered by these laws. However,
there is a distinct difference in the amount protected. In fact, many
traditional IRAs, as well as other IRAs, are capped at $1,245,475. Therefore,
any amount over that may not be protected from bankruptcy. It is important
to note that this cap-amount is changed every three years as inflation
changes the dollar value.
What Should I Do if I Am Considering Filing for Bankruptcy?
Because bankruptcy can seem a bit tricky, stressful, and unsettling, it
is best to speak with a bankruptcy lawyer regarding your specific situation.
By doing so, you can ensure that you are making the appropriate moves
throughout your process and that your retirement funds are protected.
After all, you worked hard for your money; no one should be able to take
away a lifetime of work.
Southern California bankruptcy attorneys at Wadhwani & Shanfeld understand the stresses that come when contemplating bankruptcy options.
We are here to help you protect not only your retirement savings, but
your future as well. Call the firm today to schedule your free consultation
at (800) 996-9932.