Pensions, 401(k)s, IRAs, and Annuities are Most Often Protected in Bankruptcy

People filing bankruptcy are often worried about losing their retirement money. However, in the vast majority of cases, this money is protected and untouchable by the trustee. This is why I advise against raiding a pension or IRA for money to pay down debts. You can seriously jeopardize your future for no good reason. This is because the money is either not considered an asset, is a fully exempted asset, or has a high exemption amount.

Retirement Money Not an Asset

Some retirement vehicles are not even considered part of your "bankrupt estate" or pool of assets available to a trustee to sell to pay creditors. The main requirement is that there be an "anti-alienation clause" (a clause preventing creditors from accessing those funds). The logic behind this is that if creditors cannot seize the money outside of bankruptcy, then they should not be able to do so inside one. Plans of this nature are usually maintained by employers as group plans with many participants. These are:

An Education IRA
An ERISA qualified employee benefit plan
A deferred compensation plan, or
A tax deferred annuity

Retirement Money Exempted

Other retirement investments are considered part of the "bankrupt estate" because they may only have one participant or not have an anti-alienation clause. However, most are considered completely or partially exempted under the bankruptcy code. These are:

Pensions, profit sharing & stock bonus plans
Annuities
IRAs
Roth IRAs
Simple Employee Pensions
Simple Retirement Accounts
Deferred Compensation Plans

IRAs, however, have an exemption that is capped at $1,095,000 (adjusted periodically for inflation). This area of law is rather complicated, though. If you are considering filing bankruptcy, please contact me for a free consultation to discuss your options and how protected your retirement is from creditors.

Looking for more information about bankruptcy? Get the answers to the most frequently asked questions by downloading my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey. It will give you the answers you need all in one place. Then call me at 888-857-8418 or contact me through this site for an appointment for a free consultation to discuss your case.

The Law Office of Steven J. Richardson serves New Jersey, including: Gloucester, Camden, Burlington, Salem, Cumberland and Atlantic Counties and surrounding New Jersey communities, including Woodbury, Colonial Manor, North Woodbury, Woodbury Heights, Deptford, Thorofare, Gloucester City, Washington Township, Blackwood, Brooklawn, Westville and Pitman.

Richardson Law Offices
40 Newton Avenue
Woodbury, NJ 08096
Phone: (856) 686-9910
Fax: (856) 686-9911