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Protecting Pensions, 401(k)s, IRAs, and Retirement Annuities in a NJ 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).

So What Do I Do?

This area of law is rather complicated, though. So, if you live in southern New Jersey and are considering filing bankruptcy, please feel free to call me at 856-432-4113 or contact me through this site to make an appointment in my Woodbury office to discuss your options and how to protect your retirement from creditors.

If you are looking for further information about bankruptcy, then download my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey.

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Steven J. Richardson
Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.