How Does Bankruptcy Affect Retirement Accounts in Florida?

Posted on : August 1, 2019
retirement-accounts

Are you considering filing for bankruptcy in Florida? If you have retirement accounts, it’s important to understand how to file in such a way that most, if not all, of your retirement funds are protected from liquidation by the bankruptcy court. Here’s what you need to know. 

Which Type of Bankruptcy is Best for People With Retirement Accounts? 

There are two primary types of bankruptcy filed in Florida by consumers: Chapter 7 and Chapter 13 bankruptcy. Both types of bankruptcy offer protections for some retirement accounts (provided the funds aren’t yet withdrawn), however, other factors may be important when considering which type of bankruptcy to choose. 

For example, elderly individuals with a fixed income but significant assets may be better off choosing to file a Chapter 13 bankruptcy — assets aren’t liquidated to pay off debts and monthly payments to the bankruptcy court are capped depending on each person’s disposable income. 

What Retirement Accounts are Protected? 

With a few exceptions, ERISA-qualified retirement plans are fully protected with no cap on the amount. The following types of retirement accounts are ERISA-qualified and safe from liquidation. 

  • 401(k)s and 403(b)s
  • Profit sharing retirement plans 
  • Money purchase retirement plans 
  • Defined benefit retirement plans 
  • Keoughs 

Accounts With Limited or No Protection 

Not all retirement accounts are fully protected. Some retirement accounts offer limited protection from creditors in a bankruptcy, while others offer none. CDs, savings accounts, and other liquid assets are completely unprotected from creditors in a Chapter 7 bankruptcy, and they’re also counted as a resource for individuals filing a Chapter 13 bankruptcy. Traditional and Roth IRAs do offer limited protection, and can secure funds up to $1,362,800 per person. Anything over this amount is liquidated and paid to the bankruptcy court to satisfy debts. However, this cap self-adjusts for inflation and the increase in cost of living every three years. 

When to Contact a Florida Bankruptcy Lawyer 

If you have retirement accounts and are considering bankruptcy, don’t hesitate to reach out to an experienced bankruptcy attorney in Florida. It’s possible that you may need to open new accounts or move funds around before formally filing for bankruptcy — your attorney can help you understand what you need to do to best protect as much of your money as possible. Call the Caplan Bankruptcy and Family Law Firm for more information or to schedule a consultation at (407) 378-3734.