What happens to my pension after bankruptcy?

The rules for bankruptcy and pensions are a major concern for many people. During a Chapter 7 bankruptcy, your assets are typically liquidated in exchange for the eradication of your debts. Therefore, many people wonder whether a 401k or pension plan will be affected and whether they will lose the funds during a bankruptcy filing.

Any Chapter 7 allows for certain exemptions, many based on state law, and others based on federal rulings. A pension plan is one of the things universally considered exempt from a bankruptcy filing. You do not lose your retirement funds if you file for bankruptcy.

You should, nevertheless, keep in mind that your pension plan counts as a personal asset, and that when the bankruptcy court asks you to list your assets, you must include any pensions you have, along with their current values. If you do not, you risk giving the impression that you are not fully disclosing all information. Even though you know the money will not be taken by the bankruptcy court, the court will want to know of its existence.

You should also understand that part of the reason the court representatives want to know about the account is that they will want to check its history. If you are considering, for example, placing a large amount of cash into the account just before filing in order to keep the cash from being seized in the bankruptcy, you need to avoid doing so. The bankruptcy court can, and will, check on this, and when the court representatives see the deposit, they will reverse it and potentially punish you with serious repercussions.

When you are considering bankruptcy, obtaining legal help is important so that you can understand what your obligations are and what your options are during your bankruptcy proceedings.