Are pensions exempt in Chapter 7 bankruptcy?

This is a vitally important question for those who have set aside money for retirement and who are now considering bankruptcy. Your pension is one of the most important tools you have for ensuring your financial future and making sure you are able to support yourself in retirement. As such, the US bankruptcy code recognizes the importance of keeping your pension, even if you find yourself in debt trouble. 

As a general matter, pension or retirement savings plans such as 401K plans, IRAS, 403(B) plans and other types of officially recognized pension plans are going to fall under the bankruptcy exemptions on the federal level, the state level, or both. This will mean that you are not required to relinquish your pension in the event that you declare bankruptcy. Other exemptions may also include some of the equity/value in your home and your personal property up to a set dollar amount. 

These rules allow you to use bankruptcy as a viable option, provided you are eligible to do so. You will, however, need to meet all chapter 7 bankruptcy requirements in order to file; this includes the income caps which will look at either whether your income is below the state median or whether you are able to pass a means test. If you are currently drawing income from a pension plan (especially a defined benefits plan) that income may in certain cases be counted to determine your monthly intake for the means test. 

To determine exactly what the rules are regarding your pension and bankruptcy, you should strongly consider speaking with an attorney for advice and guidance.