Protecting your Retirement Accounts During a Bankruptcy in Wichita, KS

by | Nov 27, 2013 | Lawyers & Law Firms

If you’re considering filing for bankruptcy protection, you should consider one asset above almost any other: your retirement accounts. Are these accounts protected from seizure during Bankruptcy In Wichita, KS? Read on to find out.
ERISA and how it Protects Your Retirement Funds

The Employment Retirement Security Act of 1974 is a law that’s intended to protect pensions from investments made by pension administrators and employers. However, as the years have gone by, more employers switched from a defined benefit plan to a 401(k) model where employees’ contributions are matched. ERISA affects 401(k)s as well; if your plan is employer-sponsored, it qualifies for ERISA protection and cannot be seized to pay debts.

Individual Retirement Accounts (IRAs)

Many workers fund their eventual retirements with an IRA. If your individual retirement account qualifies for ERISA, it cannot be seized during a bankruptcy. However, IRAs not receiving employer contributions don’t qualify. If you fund your own IRA, it can be included in assets collected by a trustee and divided amongst your creditors.

Playing Fast and Loose

If you think you can work around the rules by making a sizable contribution to your 401(k) plan, you’re probably in the wrong. These funds can be considered during Bankruptcy In Wichita, KS; if the court thinks you’re trying to game the system, they can allow your trustee to use the funds in your 401(k) to pay your creditors. A bankruptcy attorney can help you come up with a legal strategy that protects as many of your assets as possible.

As we mentioned above, your 401(k) and other retirement accounts are usually safe from creditors. However, if you withdraw funds from the account and put them into a conventional bank account, or buy other assets before filing for bankruptcy, the asset will not receive the ERISA protection given to retirement funds. If your plan is deemed fraudulent, it will not be protected from creditors.

If you are thinking of filing for bankruptcy, you should hire a bankruptcy lawyer who will tell you about the pros and cons of each course of action. Tell the lawyer about your retirement funds, and whether they are protected under ERISA (which you can find out through your employer).

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