Understanding Bankruptcy, 12/4/2019

Filed under: Latest News |

BY MICHAEL A. CIBIK, ESQ.
AMERICAN BANKRUPTCY BOARD CERTIFIED

Question: What happens to my retirement plan if I file for bankruptcy?

Answer: Usually, you can keep your pension or retirement plan funds when you file a Chapter 7 or Chapter 13 bankruptcy. Typically, the entire account is protected if it is ERISA qualified. Most 401(k)s, 403(b)s, profit-sharing plans and defined-benefit plans are ERISA qualified. General savings accounts, stock-option plans and investment accounts can be ERISA qualified plans, but usually are not.

Standard IRAs and Roth IRAs are protected up to $1,362,800 per person. Anything above that amount can be taken by the bankruptcy court to pay your creditors.

It is also important to keep in mind that retirement benefits paid to you as income are not exempt. In Chapter 7 bankruptcy, the court cannot take any retirement benefits that are necessary for your support, but it could take excess amounts to repay your creditors. In Chapter 13 bankruptcy, your retirement income will help determine what portion of your debts you must pay in your repayment plan.

Next Week’s Question: Will filing for bankruptcy affect my job or future employment?

Michael A. Cibik, Esquire
www.ccpclaw.com
ccpc@ccpclaw.com
215-735-1060

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