Ontario Bankruptcy & Retirement Lawyers
Once you reach retirement age, you may think you’ll have your money woes under control. Some people do, amassing millions of dollars in wealth. Then there are those who are in their 60s and still struggling to get by. They may be disabled and unable to work. They may have just been stuck in a dead-end job forever and unable to save up for retirement.
If you do have some retirement funds and don’t want to lose them in a bankruptcy, the good news is that you probably won’t have to. While you won’t need to use your retirement accounts to pay your debts, you do need to understand the processes involved.
The team at Wadhwani & Shanfeld understands all the local, state, and federal bankruptcy laws involved. Contact an Ontario bankruptcy & retirement lawyer today to see how we can help you with your case.
What Retirement Accounts Are Protected?
Most retirement accounts are protected by federal bankruptcy rules. There are two main types of retirement accounts that are protected in bankruptcy:
- Employee Retirement Income Security Act (ERISA)-qualified retirement accounts. Most 401(k), 403(b), profit-sharing and employer-sponsored deferred compensation plans are fully protected in bankruptcy without limitations.
- SEP-IRA, SIMPLE IRA and most rollover IRAs. These accounts are fully protected under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).
What is Not Protected?
If your money is not in an actual retirement account, then it is probably not protected from bankruptcy. Money saved in regular savings accounts is not protected. Neither are investment accounts, stock option plans, or other non-retirement bank accounts. Even if you consider these accounts to be your retirement savings, the law does not see things that way and the money may be used to pay your creditors.
How is Retirement Income Treated?
If you are receiving retirement income, it may affect your bankruptcy. For Chapter 7
bankruptcy, you must pass a means test to show that you’re unable to repay your debts. The test takes into account income, so any monthly retirement benefits from a pension or retirement account may be used to determine income.
In a Chapter 13 bankruptcy, you will be on a debt repayment plan. Therefore, your income will be used to determine how your debts will be repaid. Retirement benefits may factor into your income calculation.
If you are receiving Social Security benefits, they are considered exempt, as long as you manage them properly. Social Security payments must be kept separate from the rest of your money. Do not commingle the money with other accounts or income. Instead, use a separate bank account.
Contact Wadhwani & Shanfeld Today
Financial issues can be scary to deal with as you near retirement. Find out how your retirement accounts and income are affected.
The team at Wadhwani & Shanfeld can help as you navigate bankruptcy in your retirement years. There are protections and exceptions to consider. To schedule a consultation with our Ontario bankruptcy and retirement lawyers, call (800) 996-9932.