Currently Retired
Generally speaking, retirement funds are protected in bankruptcy. Though there are some exceptions you should know about.
Social security income and other federal benefits are generally exempt, though things get tricky when the money hits your account. Federal benefits can be garnished once they’re in your account. Luckily, you can exempt up to two months’ worth of funds received from a federal benefit in your bank account. So, don’t let federal benefits build up in your account if you’re looking to file soon.
Things are a little bleaker if you’re utilizing another retirement fund. Any retirement income that you don’t need for basic expenses could be garnished in a Chapter 7. In the case of a Chapter 13, your retirement income will likely come into play in determining your payment plan.
Nearing Retirement
Federal retirement exemptions can go a long way to protecting your retirement. Private company pensions must qualify under the Employment Retirement Income Security Act of 1974 to qualify for exemption. Other pensions can still qualify, but they must meet other criteria of the Internal Revenue Code. You can protect up to $1.2 million in your traditional or Roth IRA. 401(k)s are completely exempt. It’s pretty rare for one of my clients to lose any of there retirement in a bankruptcy.
Bankruptcy can be very complicated, especially of your trying to protect your retirement. If you’re a Modesto resident who’s retired or nearing retirement and are looking into Modesto bankruptcy, please give our office a call and we’d be happy to schedule you a free consultation.