You may have diligently saved throughout your entire career to set yourself up nicely for retirement. So, understandably your worst nightmare may be for this hard-earned savings to be taken in one fell swoop once you file a consumer bankruptcy petition. You may feel torn between saving valuable assets like these and seeking total financial relief and a fresh start. Well, before you make a definitive decision, please follow along to find out whether your retirement accounts will be protected during your bankruptcy case and how a proficient Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., P.C. can help you navigate assets such as these.
Are my retirement accounts protected during my bankruptcy case?
You may rest easier knowing that your retirement accounts may be protected during your bankruptcy proceedings, thanks to the Employee Retirement Income Security Act (ERISA). This is because ERISA requires that retirement funds be held in a trust that is considered separate from your personal assets and also your employer’s business assets. The assets held within any trust type are technically not considered under your ownership and therefore cannot be included in your bankruptcy estate. Ultimately, this means that your creditors cannot seize these funds to compensate for what they are owed in the event of your consumer bankruptcy filing. With this, it is also worth mentioning that your retirement funds may still be protected should your employer ever declare business bankruptcy.
Which retirement accounts are offered this protection?
To reiterate, ERISA-qualified retirement accounts are generally offered protection in a bankruptcy case. Of note, the ERISA may consider employer-sponsored plans and employee health and welfare benefit plans alike. With that being said, you may possess any culmination of the following qualified accounts:
- Employer-sponsored plans:
- 401(k) plans.
- Deferred compensation plans.
- Pensions.
- Profit-sharing plans.
- Employee health and welfare benefit plans:
- Health flexible spending accounts (FSAs).
- Health maintenance organization (HMO) plans.
- Health reimbursement arrangements (HRAs).
- 419(a)(f)(6) and 419(e) welfare benefit plans.
- Dental and vision plans.
- Disability insurance.
- Prescription drug plans.
And so, as it is implied, non-ERISA-qualified plans are generally left vulnerable to the threat of bankruptcy. A common example is an individual retirement account (IRA), since it is usually not sponsored by or involves your employer. However, there may be some threshold of protection here, as per the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). But before assuming it is in safekeeping, we advise you to go over it with your hired attorney.
If you have gotten this far, we now ask you to reach out to a talented Rockland County bankruptcy attorney to schedule an initial consultation. Overall, we strongly encourage you to retain legal representation from The Law Offices of Allen A. Kolber, Esq., P.C. for all your bankruptcy needs.
