Many prospective bankruptcy filers worry about what is to come to their retirement savings accounts. You may wonder if you will lose the savings that you may have been building for years or even decades.
Can I Keep What I’ve Saved?
Retirement savings accounts have been broadly protected from the reach of Chapter 7 trustees and excluded or exempted in the asset analysis in Chapter 13. To put it more simply, your current retirement savings can be fully protected and exempted without a limit or cap.
Voluntary and Mandatory Retirement Contributions and the Means Test
Some employers have mandatory retirement contributions. For example, if you are a public employee, public school teacher, or you work for the state or your city, you may have a mandatory contribution to CalPERS or STRS. Those contributions are likely mandated by your employer and they cannot be adjusted or stopped. Mandatory contributions can be calculated into the means test and reduce your disposable monthly income available to pay off creditors.
Other private employers may offer 401K or IRA retirement plans to their employees. These are a voluntary contribution. Voluntary contributions are not taken into consideration when calculating your disposable monthly income available for creditors.
Can I Keep Contributing?
If you have a voluntary retirement account such as a 401K, IRA or 403B, you can likely continue your voluntary contributions if you are filing a chapter 7. However, if you are filing a chapter 13 bankruptcy, there are circumstances that you may have to pause your voluntary contributions while you are making payments to the trustee in order to make your repayment plan feasible. If you have enough disposable income that you can afford the repayment plan there are some circumstances where you may be able to continue to contribute.
If you have questions about your retirement accounts and bankruptcy, reach out to your Folsom bankruptcy attorney at (916) 780-7005.