Will I Lose My Retirement If I File for Bankruptcy?

Generally speaking, no. However, there are always exceptions.

Most retirement plans are ERISA qualified, which stands for Employee Retirement Income Security Act of 1974. This law was enacted to protect your retirement accounts from risky investments by your employer or plan administrator. If the plan is ERISA qualified, then your bankruptcy Trustee cannot seize your retirement money to pay your creditors.

Can I Protect My Retirement Plan?


Most personal property such as cash, bank accounts, furniture, clothes, and retirement plans can be protected by exemptions allowed by each state. Most people that file bankruptcy are allowed to keep most, if not all, of their personal property in bankruptcy.

What is an ERISA Qualified Plan and Why Do I Need it for My Bankruptcy Case?

Bankruptcy Questions About Retirement PlansIf you have recently filed a Chapter 7 bankruptcy or a Chapter 13 bankruptcy it is important that you ensure your retirement plans are ERISA qualified.  The bankruptcy trustee, who represents your creditors, will probably require that you present him or her with evidence at the creditor’s meeting, showing that your retirement plan with your employer (if you have a retirement plan) is a ERISA qualified retirement plan. ERISA is the abbreviation for Employee Retirement Income Security Act of 1974. This law was enacted to protect your retirement accounts from risky speculation by your employer or plan administrator so that when you retire, your money will be in the account and not lost by risky investments.

Most employer retirement plans are ERISA qualified plans. If the plan is ERISA qualified, or an IRA, the bankruptcy trustee cannot normally seize your retirement money to pay off your creditors. However, a very small percentage of retirement plans are not ERISA qualified and/or are not legitimate IRAs, and therefore are not protected. In this event, if you file bankruptcy, the trustee can take your retirement money. Don’t panic, if you work for a legitimate company, it is very likely that the plan is ERISA qualified or protected from your creditors.

Before you sign the official bankruptcy petition (not the worksheets), it is your responsibility to contact your employer or former employer with which you have the 401K, IRA, retirement plan, and obtain verification from the employer that the plan is ERISA qualified. We suggest you contact the employers personnel/payroll or human resources department for this information. They may refer you to the plan administrator, such as Fidelity or Charles Schwab, etc. for the information. It may take several weeks for them to send you this information, so don’t wait until a few days before the creditors meeting to request this information. Start working on it now!

Usually, you will need for your employer to send you documentation, such as a plan summary. This is the booklet you probably received when you originally signed up for the plan, or a letter on company letterhead from the plan administrator, stating that the plan is ERISA qualified and the dollar amount in the plan.

Do not bring only your quarterly statement your employer sends you. This is unacceptable to the trustee. You may bring the quarterly statement, but you must have the statement, usually called a plan summary, stating the plan is ERISA qualified.

You must have this documentation with you at the creditor’s meeting which will be scheduled approximately 4-6 weeks after you file bankruptcy. If you do not have the documentation, the trustee will usually allow you an additional 10 days to provide this to him/her. If you do not provide this documentation to the Trustee, the Trustee could ask the Judge permission to seize your retirement account and pay your creditors with this money.

In conclusion, make sure your retirement account is ERISA qualified before you file the bankruptcy. If you have any questions contact us today.