One of the most frequently asked questions about
bankruptcy regards the effect that filing will have on a person’s retirement
plan. Many are fearful that, if they file, they will lose their hard earned
pension and be forced to start from square one. This is not the case,
as retirement assets were deemed exempt from creditors following a 2005
congressional overhaul of bankruptcy law. If you file for
Chapter 7 or
Chapter 13 bankruptcy, you will be able to keep nearly all of your retirement accounts
and pension plans.
Under most circumstances, the following are untouchable by creditors:
- Some IRAs
- Profit-sharing plans
- Defined benefit plans
The special protections on retirement assets make it wise to refrain from
dipping into these funds prior to filing for bankruptcy. If you take your
money out and use it for other purposes, it will lose its protected status.
Using money early from your retirement funds is rarely a good idea, as
premature withdrawal will also result in harsh taxes and fees. For these
reasons, it is highly encouraged that you leave your retirement money
in its protected state if you are considering filing for bankruptcy.
Special Exceptions for Certain IRAs
Traditional and Roth IRAs are the exception to this rule. Bankruptcy courts
are unable to touch up to $1,245,475 per person, meaning that if you have
more than this amount in your IRA accounts, they can claim any excess.
Additionally, while the funds within your retirement accounts are deemed
exempt, any payments that you receive as income from these benefit plans
are claimable by creditors. They cannot take what is required for your
support, but any amount that exceeds your necessary income is subject
to creditor repayment.
Bankrupt? Contact the Pritchard Law Firm Today!
If your debts have become overwhelming, contact a Fort Worth bankruptcy
lawyer from the Pritchard Law Firm today to examine your legal options
with an experienced professional. Our firm has helped countless individuals
throughout our decades of successful practice, and we are confident that
we can get you back on the road toward a debt-free future.
Get started towards a new beginning – call (817) 727-4001 or request a free consultation