A common concern many people have is whether their retirement account will be protected in Bankruptcy. The key to whether a retirement can be protected is whether it is an ERISA qualified retirement plan.
“ERISA” refers to a retirement plan that is qualified under the Employee Retirement Income Security Act of 1974. ERISA qualified accounts are generally started and contributed to by your employer. If you personally began and funded your retirement plan it is very likely not a ERISA qualified account and may not be protected in bankruptcy.
Usually 401(k)s, 403(b)s, some IRAs, and government retirement plans are protected in Bankruptcy.
IRAs commonly have the issue of not being ERISA qualified. If your IRA was started by your own money and not contributed to by your employer, it is very likely it is not ERISA qualified.
Retirement accounts may not be exempt from the Bankruptcy under retirement exemptions if they are not ERISA qualified. However, it is important that you talk to your attorney about your retirement plan because there may be other exemptions such as the “wild card” exemption that could protect some or all of your retirement if it is not ERISA qualified. Additionally, your attorney can discuss with you what type of Bankruptcy to file to best protect your assets.
For example, although unexempt assets are not protected in a Chapter 7 Bankruptcy, they may be protected in a Chapter 13 Bankruptcy.
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