Protecting Your Retirement in Bankruptcy

Most forms of retirement are protected when you file under any Chapter of bankruptcy. There are a few exceptions to this, so make sure that whatever kind of retirement you have is protected from your creditors.

If in fact all of your retirement funds are protected, that means that if you file a Chapter 7 “straight bankruptcy” case the Chapter 7 trustee will have no right to take any of it to pay your creditors. And if you file a Chapter 13 “adjustment of debts” case, the value of your retirement funds will have no effect on how much you have to pay to your creditors.

What’s Protected

Virtually all forms of retirement are protected. And the amounts protected are unlimited except in certain specific situations.

All forms of retirement covered by ERISA (Employee Retirement Income Security Act)?the very broad federal law governing pensions and retirement funds?are protected. These include:

• 401(k)s
• 403(b)s
• IRAs (Roth, SEP, and SIMPLE)
• Keoghs
• profit-sharing plans
• money purchase plans
• defined-benefit plans

There are other forms of retirement funds which are recognized by the Internal Revenue Service and so are also protected in bankruptcy, including:

• stock bonus and employee stock ownership plans under 401 of the Internal Revenue Code (IRC)
• qualified annuity plans under IRC 403
• church, partnership, proprietorship and government retirement plans under IRC 414
• deferred compensation plans under IRC 457
• retirement plans by tax-exempt organizations under IRC 501(a)

What’s NOT Protected

Considering this long list of forms of protected retirement, what isn’t protected?

In case it isn’t obvious, money that you simply have in the bank or hidden away that you have set aside for your retirement is not protected.

More broadly, funds that are more formally designated to be for retirement but still don’t meet the legal requirements may not be protected. Examples include funds that do not qualify as a retirement plan under any of the provisions of the Internal Revenue Code, or that were set up appropriately but no longer qualify because they weren’t funded properly. These problems tend to be with those set up by an individual or small business without the appropriate expertise or the money to pay for the needed expertise.

Retirement plans can also lose their protection if they are transferred, either by rollover into a non-eligible form of retirement, or sometimes by inheritance.

Retirement with Dollar Limitations

As mentioned above, there is usually no dollar limitation on protected retirement plans. One exception, although one that will not likely be relevant to most of our clients, under Section 522(n) of the Bankruptcy Code the funds protected in both a traditional and Roth Individual Retirement Account (IRA) is limited to $1,245,475 per person. (This amount is adjusted every three years to account for cost of living increases, most recently on April 1, 2013.)

Conclusion

Again, most retirement funds are protected in bankruptcy, and should give you no cause for worry. But you should have your attorney verify that your retirement is of the form that is indeed safe.

If you are in New Jersey, the Law Office of Andrew B. Finberg can help. The initial consultation is free. Please call us at (856) 208-4152. Or you can use this form to set up your no-obligation consultation with us. Let us review your situation personally so that you get the reassurance you need. We look forward to helping you get a fresh financial start without worries.

Thank you for visiting our website.

I have yet to meet the individual that has wanted to file for bankruptcy. In laying out one’s plans for the future, few, if any, ever contemplate having to utilize bankruptcy protections. However, the reality is that many quality individuals are forced to face unforseen complications that necessitate a bankruptcy filing.

One of the most common refrains I have heard is, “I’m not like the rest of your clients.” It is far too easy to generalize and group together those that are forced to seek Federal Bankruptcy protections. There is no “like” to anything with our various clients. The truth of the matter is that the only common link amongst our clients is financial hardship. The need for bankruptcy protections does not descriminate along any common denominator.

Since the inception of this firm, we have had the honor to represent some of the finest individuals imaginable. While it is easy to imagine and label those seeking bankruptcy protections as out of control spenders with little contemplation of consequences, reality paints a vastly different picture. Those that were previously in a position of financial strength are suddenly vulnerable due to any number of variables. Loss of income/employment, illness and divorce are just a few of the circumstances that can suddenly arise and shake the very foundation of one’s personal finances.

It is my firm belief that everyone knows an individual that has had to seek the relief of bankruptcy protections. Be it a friend, neighbor or family member, all of us have known someone who has faced financial obstacles that seem insurmountable. It is imperative to understand that these obstacles are rarely self created. There should never be a ‘Scarlet Letter’ labeled to those in need of assistance nor should there be any generalizations as to how they got there.

A daily review of current events displays famous actors, singers and athletes in need of bankruptcy relief. What isn’t laid out in print are the millions of others trying to save their homes, address past due obligations and obtain fresh starts. These individuals share little in common other than a need to restore their personal finances. The Federal Bankruptcy Code offers a key to unlock the many doors closed with financial hardship. Those in need of the key do not fit into any convenient categories or stereotypes and they come from each and every walk of life.

Welcome to Our New Jersey Bankruptcy Law Blog

When you are in need of legal advice about filing for bankruptcy, a hard-working lawyer who knows there is life after debt can be of great assistance and look out for your rights. The bankruptcy courts can be confusing and intimidating, with a unique set of rules and a language of their own. An attorney who understands the law and the process can help you evaluate your options and make the right decisions.

At Wizmur & Finberg, LLP, we assist clients throughout New Jersey who need advice about bankruptcy and debt relief. We know how to quickly determine the next step in your bankruptcy or debtor-creditor case.

Contact our office by e-mail or call us at 856-988-9055 to discuss your situation with an attorney.

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We established this blog to provide valuable information to people in New Jersey who have questions about bankruptcy or who are interested in bankruptcy law. We will regularly update this blog, posting on a wide range of bankruptcy law topics, including:

• Chapter 7
• Chapter 13
• Credit card debt
• Medical debt
• Debt relief

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