Boston Bankruptcy Lawyer

Retirement Funds and Bankruptcy

In more and more cases, a person’s retirement savings or pension rights are the most valuable assets in the estate. There are two separate issues which determine whether a creditor or bankruptcy trustee has any rights to a debtor’s retirement assets:

• Is the retirement fund property of the estate?
• If the retirement fund is property of the estate, can it be exempted?

The Supreme Court has held that retirement plans which have a legally enforceable anti-alienation clause, a clause that prevents creditors from attaching the retirement funds of a debtor, are not property of the bankruptcy estate. Because they are not part of the estate, they are not subject to the jurisdiction of the bankruptcy court and cannot be accessed to pay creditors.

The vast majority of pensions and 401K savings plans that are qualified for protections under ERISA, the Federal Pension Savings Act, have an anti-alienation clause that excludes them from the bankruptcy estate.

Assets that are not property of the estate do not have to be the subject of a claim of exemption. These funds simply don’t enter into the equation regardless of the size of the benefit.

When retirement savings are part of the property of an estate, because they are either not ERISA qualified or because they are held in an IRA, they may be exempted from being included in the estate under the available exemption statutes.

Property that is exempt from seizure is removed from the estate and is not liable for the payment of creditor claims. The exact scope of the exemption and how much value can be exempted depends on the language of the exemption selected.

Contact a Boston Bankruptcy Lawyer

If you are considering filing for bankruptcy and want to know what property is exempt and what isn’t, contact the Boston bankruptcy lawyers of Joshua Spirn & Associates at 1-800-975-5346 today.