Bankruptcy Retirement Account Exemption Explained.
Bankruptcy retirement savings accounts/dollars are exempt in bankruptcy. Only if you do not withdraw these funds prior to filing.
The money you have in your retirement accounts is protected in all Bankruptcy filings. You should not withdraw these funds unless you have carefully examined other options. Retirement savings is a great financial strategy for your future. Hopefully, if you never withdraw these funds until you have reached retirement age, a substantial nest egg will serve as a cushion for your future. Consultation with a BK lawyer is essential.
It is never a good idea to tap into your retirement account early.
- An early withdrawal could cost you penalties. This is just one basic reason it is not a good idea.
- You will need this money someday, and it will not be there for you.
- I have found that many debtors, before they come to me for Bankruptcy, have tapped into their retirement funds. Yet, they are still struggling and cannot catch up.
Trying to gain control of outstanding debts that are just compounding by the day is a stressful situation.
Retirement Account Exemption (all Bankruptcy Chapters: 7, 11 or 13)
It is important to know that retirement money is exempt from Bankruptcy. There is no limit to the amount of money in your retirement funds to be exempt from Bankruptcy. Rather than withdrawing funds from these accounts, you should make an appointment with me. I am a NJ Bankruptcy Lawyer and will determine if Bankruptcy would be a better option. Bankruptcy Code does not permit creditors access to your retirement funds.
Once you withdraw funds from your retirement account, you cannot go back and exempt these accounts in Bankruptcy. Even if you withdraw for 1 day, that is considered a withdrawal that cannot be reversed. In that case, the retirement account exemption does not apply.
Also, retirement withdrawals within six (6) months of a Bankruptcy filing are considered income. This withdrawal could potentially make you ineligible for bankruptcy.
You should seek advice from a Certified BK lawyer to determine if Bankruptcy (Bankruptcy Chapter 7, Chapter 11, or Chapter 13 bankruptcy) is right for you before you make withdrawals from your retirement savings.
Do not tap into your retirement monies to pay debts. Call me, Ralph A. Ferro, Jr., Esq., for a free Bankruptcy consultation. I offer Bankruptcy protection for your retirement.
There is bankruptcy protection for your retirement savings when you file bankruptcy.
It would be best not to withdraw or cash out these valuable assets to pay your debts without carefully examining your overall debts. Since there is retirement savings account protection in bankruptcy, these assets can be out of reach from creditors. While you are in default, you can continue your contributions.
If you are considering bankruptcy, consult an experienced bankruptcy attorney before liquidating your pension funds. It would be best not to withdraw from your retirement savings accounts to pay your debts before considering bankruptcy.
Similar to 401(k) qualified plans, The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA” or the “Act”), which became effective for bankruptcies that filed after October 17, 2005, gave protection to debtor’s IRA funds. This was done by exempting IRA funds from the bankruptcy estate. In other words, most unsecured business and consumer debts.
A rollover from a SEP or SIMPLE IRA into a rollover IRA receives only $1 million of protection. This is because section 408(d)(3) rollover is not one of the rollovers of the Bankruptcy Code section U.S.C. 522(n) sanctions.
You should advise your bankruptcy attorney if you withdraw from your retirement accounts before filing bankruptcy. A careful review of these funds is necessary. Otherwise, there may not be retirement account protection from creditors.
Here is an example of what can happen when you must carefully review your options before withdrawing from your pension accounts. These assets would have been protected if these debtors had worked with a Board Certified Bankruptcy Attorney. These withdrawals should not have been done before the bankruptcy to get protection from creditors and a bankruptcy discharge.
When you withdraw funds from your pension and spend it or deposit it in another non-pension account, these monies are no longer exempt from bankruptcy.
Below is a case where the debtors did not ask:
Is there bankruptcy protection for retirement savings? Why weren’t they protected?
They did not work with an experienced bankruptcy attorney, so there was retirement savings protection from creditor reach.
In a recent case, a husband liquidated his $36,500 pension fund as follows:
- Taxes for premature withdrawal $8,500
- Gift to church $4,000
- Gift to Wife $5,000
- Bought a car $3,900
- Paid a debt of $1,000
- Retainer to his attorney $3,000
- Balance that he could not account for $6,100
The Debtors did not disclose this in Chapter 7. The Judge denied both the husband and wife’s discharges. The wife did not tell the $5,000 gift from her husband, and the husband did not disclose the withdrawal, and all that was spent. In addition, the husband could not account for $6,100.
The Debtors should not have taken these withdrawals from their retirement savings before filing for bankruptcy.
Retirement savings protection was lost.
The $36,500 were all considered fraudulent transfers. – Both bankruptcy discharges were denied….
If you are experiencing financial hardships, please get in touch with me for a free bankruptcy consultation. I will give you expert legal advice on whether bankruptcy is an option.
Retirement savings protection in Bankruptcy is available if you have the best bankruptcy lawyer. You worked all your life to put away savings for your retirement. You should be able to protect those savings even when you file for bankruptcy.
Filing bankruptcy does not affect your retirement savings accounts.
You can call me for a Free Bankruptcy Consult – before you withdraw retirement savings $ to pay debts.
Ralph A. Ferro, Jr., Esq. – NJ Bankruptcy Lawyer
Bankruptcy Protection for Inherited Individual Retirement Accounts and Your Individual Retirement Accounts
Do not withdraw your retirement savings to pay your debts before you meet with me to determine if filing for bankruptcy is better.
Call me or text me Today: Ralph A. Ferro, Jr., Esq. (201)446-5904
