Can Bankruptcy Affect Your Retirement Plans

Yes, those regular credit card and bill payment calls are annoying. You want to get out of debt and put an end to those pesky calls. But is bankruptcy the right solution? Filing a bankruptcy petition has long lasting consequences and ramifications. Will bankruptcy jeopardize your IRA, pension, 401(k), or retirement plans? No, it won’t.

Unless you use the funds to pay off your debt obligations, a bankruptcy petition is unlikely to have any effect on your retirement savings.

In Chapter 13 bankruptcy, you get to keep your property, but you have to pay all or some of your debts over a period of 3 to 5 years. That means that your assets are not liquidated. Instead, they are reorganized and the bankruptcy is funded by your wages. In Chapter 7 bankruptcy, you will probably have to surrender some property, but your retirement accounts are usually exempt. They are not considered as part of your bankruptcy estate.

The federal government amended the bankruptcy laws in 2005. The new laws have made nearly all pension plans and retirement accounts exempt from the creditors of the individual. The new ruling allows individuals to maintain these funds just in case they plan to file Chapter 7 bankruptcy. Since the pension plans and retirement accounts are now exempt, in Chapter 13 bankruptcy they won’t be considered while calculating the amount you have to repay to your unsecured creditors in your repayment schedule.

Pension plans and retirement accounts that are exempt and protected, include profit-sharing plans, defined-benefit plans, money purchase plans, and all ERISA-qualified plans including 401(k)s, 403(b)s and IRAs.

How SM Law Group can help you?

Filing for bankruptcy is a complicated process. Even simple errors can result in the dismissal of your petition. Our experienced bankruptcy attorneys can guide you through the process and protect assets that are important to your future financial security. We will help you get the maximum benefit out of the discharge. In addition, a qualified attorney will prevent creditors from circumventing the discharge.

In order to ensure your financial security in the long term, you should know how bankruptcy will affect your retirement plans. Our qualified bankruptcy attorneys are aware of your rights, obligations, and exemptions regarding your pension and retirement accounts. Do you think bankruptcy might be the right solution for you? Contact us at SM Law Group and we’ll go through your case and advise you accordingly.