Pensions in Bankruptcy

Bankruptcy Attorney

If you are preparing to file for bankruptcy and also receive a pension, you are probable wondering if your pension will be exempt from being tapped into during a Chapter 7 bankruptcy liquidation. The answer depends widely on what state that you live in and what type of pension that you have. The positive news is that there are many types of pensions that are exempt under Federal bankruptcy law, regardless of what state that you live in. Some pension plans are partially exempt and some not exempt at all. In other words, if you have any of the following pension accounts, the bankruptcy will not go after them:

  • Educational IRA
  • Tax Deferred Annuity Plans
  • Retirement Plans Established and Maintained by Tax-Exempt Organization
  • ERISA qualified Pension and Retirement Plans
  • Government Retirement Plans
  • Deferred Compensation Plans

Again, the bankruptcy trustee cannot go after the income from these plans per bankruptcy law no matter what state you live in. On the alternative side, there are several categories of pensions that are not exempt and the bankruptcy court can use money from these accounts to satisfy your creditors:

  • Employee Stock Purchase Plans (ESPPs)
  • Inherited IRA plans
  • Plans That Are Improperly Funded or Don’t Comply with Tax Code
  • Plans Rolled-Over into a New Fund that Doesn’t Comply with Tax Code

There are few areas that can still protect these types of plans however, including a wildcard exemption. If you are planning to file bankruptcy and still wondering if your pension might be affected, please consult a Dayton OH bankruptcy attorney who can look at your situation and help you pay off your debt while not losing your pension money. There are many tactics that a bankruptcy attorney can use in your favor to exempt all or part of your nonexempt pension money.

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