How Will Bankruptcy Affect Your Retirement Savings?
If you are nearing the age of retirement – or have significant assets stashed away in retirement accounts for when that day finally arrives -- how would filing a Chapter 7 or Chapter 13 bankruptcy affect your plans for retirement?
The good news is, if you have money in an ERISA-qualified pension plan like a 401(k), 403(b), Roth IRA, SEP IRA, SIMPLE IRA, Keogh, profit-sharing plan, money purchase plan or defined benefit plan, all of your money is exempt from creditors. That means you get to keep it, even if you file for Chapter 7 or Chapter 13 bankruptcy.
The only exceptions to this rule are for traditional and Roth IRAs: the exemption is limited to $1,095,000 per person, so if you have more than that in a traditional or Roth IRA, anything over that amount can be used to pay off creditors.
You should also know that while the funds in your account are exempt, any income you receive from retirement benefits is not. If you file Chapter 7 bankruptcy and are currently receiving income from retirement benefits, you can keep what is necessary for your own support and the rest will go to pay off debt. If you file Chapter 13 bankruptcy, your paid benefits will be figured into your income when determining your repayment plan.
Greg Gilbert
Keith Maynard
