Do i lose retirement savings in bankruptcy?

Hi Ashley,

Welcome to the forums.

Most of the types of retirement savings available are unaffected by bankruptcy filing. The reason may be because the retirement plans are not a part of the property of the estate. Or it may be because they are exempted from the claims made by creditors.

The changes made to the bankruptcy code 2005 increased the protection for retirement assets.

Thanks,

Sara

yes sara, the supreme court held that an employee's interest in the retirement plans that come under the purview of the erisa (federal law on pensions) are not regarded as property of the estate. so, the debtor does not have to list them under the category of exempt assets while filing bankruptcy.

the decision of the court has been helpful for debtors as the trustee appointed in bankruptcy cannot use them to pay the creditors.

thanks.

As per Supreme Court verdict those retirement plans which have anti alienation clause and which can be legally enforceable cannot be counted as property of the bankruptcy estate. These plans are thus outside the jurisdiction of bankruptcy court. And as such can't be accessed for paying off the creditors. Anti alienation clause exists for almost all 401k savings and pension plans which are qualified under ERISA.

BTW, Anti Alienation Clause is a provision which prevents creditors from attaching retirement funds of a debtor.

what happens if retirement savings are not ERISA qualified?

"what happens if retirement savings are not ERISA qualified?"
If the retirement savings are not ERISA qualified then they are considered property of the estate.

But they may be exempted from the estate because of the available exemption limits. As per the recent amendments there are federal exemptions for IRA's and similar retirement accounts capped at $1 million.

This exemption is available in all the states.

Thanks

Retirement plans which have only one participant such as single employee corporate plans and others originated in self-employment may be considered a property of the estate. These can be lost to creditors unless subject to exemption.

401k plans are not property of the estate but IRA, Keogh plans etc are property of the estate and hence can be lost to creditors. But there are exemption limits applied.