When filing for bankruptcy, both working individuals and retirees want to know if their retirement plans will remain untouched. Prospective filers are relieved to learn that retirements funds are afforded unlimited protections, with just a few exceptions. Below our team of West Palm Beach bankruptcy attorneys give a brief overview of the laws and limitations that dictate federal bankruptcy exemptions for retirement accounts.
ERISA and Non-ERISA Qualified Plans
Since the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) amended the Bankruptcy Code in 2005, both ERISA (Employment Retirement Income Security Act) and Non-ERISA qualified plans are exempt in Chapter 7 and Chapter 13 bankruptcy filings. That is, opt-in states (states that use federal bankruptcy exemptions) and opt-out states (states that use their own state bankruptcy exemptions must use these federal bankruptcy exemptions established by the BAPCPA. In all states, retirement accounts are exempt from creditors in Chapter 7 bankruptcy cases and will not affect the repayment plans set up by Chapter 13 bankruptcies.
Most pensions and retirement plans are exempt up to an unlimited amount. These retirement accounts include.
- 457(b)s deferred compensation plans
- IRAs (SEP and SIMPLE)
- profit sharing plans
- governmental plans
- tax exempt organizational retirement plans
- money purchase plans
- defined-benefit plans
The only exemptions to this broad rule are traditional IRAs and Roth IRAs. Both are Non-ERISA qualified plans and are exempt up to $1,283,025.00 (an amount adjusted every three years to accommodate inflation and the cost of living). If a debtor has more than one IRA, this exemption amount is applied to all the retirement funds found in those multiple accounts combined, not individually. However, the bankruptcy court can increase the exemption limit if it deems it appropriate. On the other hand, the exemption applied to retirement funds in SEP IRAs, SIMPLE IRAs, and IRA rollover accounts are not capped.
In most circumstances, those who file for Chapter 7 or Chapter 13 bankruptcy can protect their retirement accounts from creditors. However, there a some rare instances when retirement plans can be left unprotected from creditors and even the IRS.
Speak with one of our experienced West Palm Beach bankruptcy attorneys, and learn how we can guide you through a bankruptcy case and ensure your assets are protected by all the exemptions you qualify for.
If you are planning to file for personal bankruptcy, call the law offices of Kelley & Fulton today.