Filing bankruptcy Chapter 7 and Chapter 13 will affect your 401K, pension(s), IRA, and other retirement funds and plans. Atlanta bankruptcy attorney, Charles M. Clapp, offers his expert advice and answers. When filing for bankruptcy near or after retiring, it’s vital to know the essential rules overriding any retirement plan you have. Learn how to avoid losing retirement funds and other essential information.

Retirement and Bankruptcy Explained by an Atlanta Bankruptcy Attorney

For both Chapter 7 and Chapter 13 bankruptcy, in most cases, you can keep your pension and/or retirement plan funds with a few limitations.

Most Retirement Accounts are Safe, but with Limited Protection

Retirement plans are not taken to pay off debt from creditors. Although, protection is limited regarding any Employee Retirement Income Security Act (ERISA)-qualified accounts and pension plan funds. If money is withdrawn from any retirement account, this puts a debtor at a much greater chance of losing the account. Keep your money in your retirement accounts; do not withdraw any funds.

ERISA-qualified pension plans include:

  • 401(k)s
  • 403(b)s
  • IRAs (Roth, SEP, and SIMPLE, but limitations are explained further below)
  • Profit-sharing plans
  • Money purchase plans
  • Defined-benefit plans
  • Keoghs (for self-employed individuals)

Non-ERISA-qualified accounts such as general checking and savings accounts, investment accounts, and stock option plans are not protected from being used to pay off debt.

Protect your Retirement with a Cash or Wildcard Exemption

In Georgia, exemptions are protected by state law; the bankruptcy court cannot touch these funds. Exemptions protect property during a bankruptcy filing, both with single and joint filings. Fortunately, exemptions protect more than just consumer property. With a few exceptions, the amount of money you can exempt is unlimited. In other words, your entire retirement account can be protected. The retirement plans stated above are all subject to an exemption.

Few states have exemptions that protect bank and investment account funds. Luckily, Georgia does, but the coverage could be minimal. Unprotected funds can be lost in both Chapter 7 and Chapter 13 bankruptcy to pay creditors. To best understand exemptions in the state of Georgia, it is important to review your case with an experienced Atlanta bankruptcy attorney.

Bankruptcy Limitations on IRAs (Traditional and Roth)

In Georgia, for a single filer, exemptions from creditors cap at $1,512,350 from all your retirement accounts combined. Therefore, this amount cannot be exempted from each account you hold. The Georgia bankruptcy court can take the amount beyond this in your accounts to pay back your creditors. This amount changes every three years due to cost-of-living increases set by the economy. The limit is set to adjust again in 2025.

Withdrawn Retirement Benefits Aren’t Exempt

Chapter 7 Bankruptcy

If you are already receiving a monthly payment from a pension or other retirement account, this can be considered income by the court. The amount will factor in for your Chapter 7 means test qualification. In a Chapter 7 bankruptcy, the bankruptcy court can take amounts over and above what you need for your everyday financial support to repay your creditors.

Chapter 13 Bankruptcy

Retirement income helps to determine what percentage of your unsecured debts you must repay in your Chapter 13 repayment plan.

An Atlanta Bankruptcy Attorney Can Help You

Are you looking for bankruptcy help? It’s crucial to find out what will happen to your retirement funds in bankruptcy. Top Atlanta bankruptcy attorney Charles M. Clapp has decades of experience successfully helping clients from all walks of life get out of debt. He puts his clients first and paves the way for an advantageous financial future

Contact CMC Law today online or call 404-585-0040 now to receive your free bankruptcy evaluation and find out how to get legal counsel and court representation.