Pensions

• When you save for retirement, you could be entitled to funds from several different retirement accounts. The pension is one option that provides money for an employee once he retires. If you have money in a pension, it cannot be taken when you file for bankruptcy because it is not part of your estate. The money is technically kept by the company who sets up the pension. You do not start receiving it until you reach retirement age.
  
  

Exempt Property

• When you file for Chapter 7 bankruptcy, the court allows you to claim exemptions for some of your property. One of the items that can be exempted from the bankruptcy trustee is money in a qualified retirement plan, such as a 401k or an individual retirement account. When you file for bankruptcy, the court asks you to provide a list of exempt property, which you may create with the assistance of your lawyer. The court then approves the list or removes items that cannot be exempted.
  
  

Chapter 13 Bankruptcy

• When you file bankruptcy, you may not even need to worry about losing any of your property, including your retirement assets. When you file for Chapter 13 bankruptcy, you do not lose any of your property. This type of bankruptcy is a form of reorganization that involves setting up a repayment plan with your creditors and paying them off over time. In this situation, you get to keep your house, clothes, cars and your retirement money as long as you agree to make payments.
  
  

Considerations

• When people get into trouble with debt, they often think about tapping their retirement money to pay off this debt. This is typically not wise because it takes money that is exempt from bankruptcy and uses it to pay off debt. If you are in serious debt, simply filing for bankruptcy will allow you to eliminate this debt without having to pay it, and you still come out of the process with your retirement funds intact.