Will I Lose My Retirement Benefits If I File for Bankruptcy?
Whether you already have a substantial amount of retirement benefits due to the nature of your work, or you are nearing retirement age, considering a personal bankruptcy filing can be stressful. You may be especially worried about the status of your retirement benefits, and whether you will be at risk of losing your retirement benefits if you file for bankruptcy. Generally speaking, retirement benefits are exempt in bankruptcy cases, but exempting assets can have different impacts depending on the type of bankruptcy you are filing. In addition, there are some limited circumstances in which particular retirement benefits may not be exempt. Our West Palm Beach bankruptcy attorneys can explain in more detail.
Florida Allows Use of Federal Exemptions for Many Pensions and Retirement Accounts
First, you should know that no assets are liquidated in a Chapter 13 case. Accordingly, you will not lose your retirement benefits if you are filing for Chapter 13 bankruptcy. If you are filing for Chapter 7 instead, there is a strong likelihood that your retirement funds are exempt under state or federal law.
Under Section 222.01 of the Florida Statutes, limited use of specific federal exemptions is permitted in bankruptcy cases. That section of the Florida Statutes allows debtors in the state to exempt various types of retirement benefits. Specifically, your 401(k), 403(b), simplified employee pension (SEP), savings incentive match plan for employees individual retirement account (SIMPLE IRA), and traditional IRA. A Roth IRA is exempt up to $1,711,975 per person until March 31, 2028. After that end date, the exempt amount is set to increase.
Under Florida law, certain state pensions are also exempt, including public employee retirement benefits, firefighter pensions, police pensions, and teacher retirement benefits. To determine if your retirement account is exempt under state or federal law, you should seek legal advice.
When Retirement Benefits Are Not Exempt
When are retirement benefits not exempt? As we noted above, Roth IRAs are only exempt up to a certain amount.
If you have saved for retirement in a bank account that is not expressly for retirement benefits, those assets may not be exempt. In addition, stock purchase plans for employees are not exempt, and neither are IRAs that you have inherited (unless you inherited them from a spouse). Finally, any retirement account or fund that was improperly funded or does not comply with federal tax law will not be exempt.
Contact a West Palm Beach Bankruptcy Attorney Today for Assistance
For any questions about exempting your retirement benefits in your bankruptcy case, or specific concerns about whether certain retirement benefits will be exempt, you should get in touch with a bankruptcy attorney who can assist you with your case. One of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller can talk with you today to learn more about your bankruptcy plans and the specific types of retirement accounts you have. We can begin working with you today on a bankruptcy filing in which you may be eligible to exempt many or all of your retirement benefits in South Florida. Contact our firm today to learn more about how we can assist you.
Sources:
law.cornell.edu/uscode/text/11
leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/Sections/0222.201.html
