Bankruptcy Law, Credit, Debt Relief, Timothy Kingcade Posts

Pensions SAVED as court rules retirement funds protected in bankruptcy

In the case Horton v. Henry, the court was recently asked whether savers subject to an Income Payments Order (IPO) would have to surrender their undrawn pension funds in bankruptcy.  Normally, under IPO people are forced to give up a proportion of their salary or wages to pay the bankruptcy trustee, but this landmark case may set a precedent.

The High Court initially rejected the argument in 2014, but the decision went to the Court of Appeal. However, the appeal was dismissed on October 7. The case is in strong contrast to the 2012 Raithatha v Williamson verdict, when the judge said savers could be forced to withdraw their 25% tax-free lump sum to pay creditors.

Bankrupt savers can breathe a little easier now. The ruling follows a similar conclusion reached in Hinton v Wotherspoon in May, which said retirees not taking any income could not be forced to withdraw savings to pay any debts.

Congress updated the bankruptcy laws in 2005. Under the current law, virtually all retirement account and pension plan funds are exempt from creditors, meaning you get to keep them if you file for Chapter 7 bankruptcy.  With a few exceptions to the rule, the exemption amounts are unlimited, so the entire amount of the retirement account is protected.

Plans subject to this exemption include any ERISA-qualified pension plan, such as:

  • 401(k)s
  • 403(b)s
  • IRAs (Roth, SEP, and SIMPLE)
  • Keoghs
  • Profit-sharing plans
  • Money purchase plans, and
  • Defined-benefit plans.

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If you are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Related Resources:

http://www.nolo.com/legal-encyclopedia/retirement-plan-bankruptcy-chapter-7-13-32410.html