Can I Keep My Retirement Plan In Bankruptcy?

People often inquire if they can keep their retirement plan funds if they file for bankruptcy in Kansas City.  Generally, the answer is "yes".  Most retirement plans are ERISA (Employee Retirement Income Security Act of 1974) qualified.  The ERISA law was enacted to protect your retirement accounts from risky investments by your employer or plan administrator.  If your plan is ERISA qualified then it cannot be seized by the bankruptcy trustee to pay your creditors.  Your retirment plan documentation, generally the plan summary, will tell you if the plan is "ERISA qualified".

A 401(k), which is a deferred compensation plan, is the most common retirement plan.  Most 401(k) plans are automatically ERISA qualified.  Another common retirement plan is an IRA (Individual Retirement Account).  Generally, IRAs are also ERISA qualified.  However, there are several types of IRAs that are not ERISA qualified.  These include plans in which your employer does not contribute money to the plan, voluntary plans for yourself that are not connected to employment (such as through a bank) and deferred compensation plans.  As advised, please check the plan summary to see if your plan is "ERISA qualified".

Additionally, in Kansas KPERS, deferred compensation plans, Social Security, federal civil service, 401(k)s, IRAs, Roth IRAs and 403(b) plans are all exempt.  There are also similar state exemptions in Missouri bankruptcy.

However, beware that the trustee may try to claim your retirement plan as non-exempt if you make a large contribution to your plan right before filing bankruptcy in Kansas City in an attempt to hide your money.  This could be considered fraud.  For more information please visit my website at http://www.thesmalleylawfirm.com

Credit Card Use Before Bankruptcy

People considering bankruptcy in Kansas City often ask if they can use their credit cards immediately before filing bankruptcy.  Generally there should not be any problem with using your credit card to pay necessities such as food, clothing and shelter shortly before filing bankruptcy. 

Section 523 of the Bankruptcy Code specifies certain situations in which credit card debt will not be discharged in bankruptcy.  Section 523(a)(2)(c) states that consumer debt totaling over $500 for luxury goods and services owed to any one creditor incurred within 90 days of filing and cash advances totaling $750 or more owed to any one creditor within 70 days of filing are non-dischargeable.  Section 523(a)(2) also states that debt owed to a creditor incurred by false pretenses or fraud is not dischargeable.  http://www.law.cornell.edu/uscode/text/11/523

Essentially Section 523 allows credit card lenders to challenge the discharge of debts in bankruptcy incurred within three months of filing for bankruptcy for anything other than necessities such as food, clothing and shelter and any credit card use within the past year if a debtor makes charges where there is no reasonable expectation of repayment, such as for goods deemed to be luxuries.  For more information please contact me, a Kansas City bankruptcy attorney, at (913) 601-3549 or visit my website at http://www.thesmalleylawfirm.com