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PENSIONS – BANKRUPTCY PROCEEDINGS

 

Pensions – Bankruptcy Proceedings – If you file for bankruptcy, you’ll be happy to know that most pensions are free from the clutches of the bankruptcy trustee. If your pension plan falls under one of the following categories, it will be excluded from bankruptcy proceedings (in other words, it’s safe):

  • Any retirement funds that are tax exempt under the U.S. Tax Code, such as 401, 403, or 408 plans.
  • Any pension plan that qualifies under ERISA (Employee Retirement Income Security Act of 1974).
  • Certain government retirement plans.
  • Deferred compensation plans.
  • Any “controlled group” retirement plan, which includes churches, partnerships, proprietorships, or governments.
  • Any retirement plan established and maintained by a tax-exempt organization.

If your pension does not fall under one of the above categories, it is part of the estate and may be subject to bankruptcy proceedings. However, under federal bankruptcy exemption law, you might be able to achieve a full or partial exemption for your pension. If you can prove to the bankruptcy trustee that you need the funds to reasonably support yourself and your family, that portion of your pension will be exempt. Housing, food, transportation, medical, and utilities costs would be considered essentials. One caveat: If you worked for a relative who set up and funded the pension plan, there are circumstances for which this exemption will not be allowed.

Keep in mind that some pension plans cannot be exempted. However, there are wildcard exemptions and general personal property exemptions to keep things interesting that may enable a person to protect at least a portion of their pension.

If you are contemplating filing for bankruptcy, contact a bankruptcy attorney to

protect your rights.  Seufert Law Office PA – 603-934-9837