Let’s Figure Our Whether Or Not You Can Keep Your Retirement Account While In Bankruptcy

Let’s Figure Our Whether Or Not You Can Keep Your Retirement Account While In Bankruptcy

Under most circumstances, retirement accounts, for example IRAs and 401ks can be kept, if you had filed Chapter 7 bankruptcy. For certain accounts, however, the secured amount may be plugged. Besides, in certain situation, the retirement accounts may not be exempted from claims by the creditors as bankruptcy trustee processes your case. So, let’s figure out the answer to your question ‘can I keep my retirement in bankruptcy?’

ERISA Vs Non-ERISA Qualified plans The type of protection to be provided to your retirement account depends on whether it’s an Employment Retirement Income security Act (ERISA) compliant plan or non-ERISA plan.

ERISA-qualified plan This is a plan settled by the employer, which further has to meet certain guidelines by IRS and it is tax exempted.

Non-ERISA-qualified plan

Most non-ERISA plans are of Individual Retirement Accounts). Non-ERISA plans usually come under the umbrella of BAPCPA protection.

ERISA qualified retirement plan As per the United States Supreme Court, ERISA qualified do not fall prey to the bankruptcy estate, which means they are not to be taken away by your bankruptcy trustee. Below are the examples of ERISA qualified plan include:     

401(k)s 403(b) or profit sharing plans 457(b) deferred compensation plans Tax exempt organizational retirement plans, and Governmental plans

One of the biggest advantages is that ERISA qualified retirement plan is secured up to an indefinite amount – you need not be bothered by trustee’s asset distribution.

Non-ERISA qualified plan Non-ERISA retirement accounts are protected by the Federal Bankruptcy and the plans involve:     

IRA’s Roth IRA’s SIMPLE IRA’s (for self-employed individuals), and SEP-IRA’s (for small business owners) Relevant retirement plans

Very unlike ERISA plan, Roth IRAs’ protection is capped at $1,283,025. In case you are holding more than one Roth IRA, you will be able to protect only $1,283,025 collectively (not per account). This simply means the bankruptcy trustee can only protect the amount is capped and repay the creditors. From then on, this cap will be attuned in every three year for inflation.

Well, today you have a new bankruptcy law and that gives unlimited protection to SIMPLE IRAs as well as SEP-IRAs. This means that if you have SEP-IRAs or SIMPLE IRA, trustee cannot take away either of it, irrespective of any amount or value.

Conditions your retirement accounts cannot be protected in: 

If you have withdrawn money from you retirement plan, it is no longer eligible to be protected

  

Protection towards retirement account or assets is only applicable when you file Chapter 7 bankruptcy If you have a valid tax alien filed against you by the IRS, chances are your retirement assets can no longer be exempted Divorcing spouses may gain the access to your retirement assets

Well, bankruptcy and benefits related the same are always complicated. You are highly advised to consult with bankruptcy attorney Austin TX.