What Happens To Your Pension When You File Bankruptcy?
What Happens To Your Pension When You File Bankruptcy
?
One of the biggest concerns and stressors when filing bankruptcy is trying to figure out what will happen to your pension when filing bankruptcy. Should you cash out the pension and put it somewhere safe? Will it be taken from you to pay off existing debts? Will the funds be frozen? How will I decide how to handle this problem?
Make sure that before you make any decision that you consult with an attorney in your applicable state to review your chapter 7 or chapter 13 bankruptcy rules and guidelines. This article will hopefully help give you a general guideline on the subject but in no way is meant to replace the advice of a professional. It is a general statement and is to be used as an aid but the final say on the matter lies in the laws of your state.
Generally speaking your pension and retirement are safe. That is good news. Things such as your pension, IRA, 403(b), and your 401(k) are generally and usually 100% safe. The Internal Revenue Service Code will need to be reviewed by a professional to see what section your retirement plan applies to in order to make sure that your funds are safe. If you cash out the money and put it in the bank or brokerage the funds are no longer protected. This is one of the worst mistakes you can make during this process. Instead, take your time, relax, and think clearly while you put the matter in the hands of the professionals that do this type of thing for a living.
One of the best piece of information I can give is to avoid the F word. The F word would be fraud. Be completely up front with the attorney when you have your initial consultation. The reason being is that due to new changes in the law a couple of years ago penalties are stiffer than ever. The last thing you want is to get caught not disclosing something or leading the court to believe something other than the truth. This is what they deem fraud and you don't want to go down that road.
For more information check out these articles on chapter 7 bankruptcy information or this great guide to filing bankruptcy.