How does bankruptcy affect my pension?

Bankruptcy should not affect your pension at all. But of course, there are exceptions to every rule. First, your pension may be affected if you are receiving a lump sum payment. Second, your pension may be affected if it is not in a proper pension account. For the most part, if you are receiving regular monthly payments from your or your spouse’s former employer, you should not have any issues and the bankruptcy should not affect your pension.

Florida uses state law exemptions in addition to federal bankruptcy exemptions. An exemption is an allowance for you to keep your things (including money) out of the grasp of your creditors or the bankruptcy trustee. Under Florida Statute §222.21, any money received by a pensioner within three months of filing bankruptcy, cannot be used to satisfy debts or creditors. The pension fund or account is exempt from all claims of all creditors. This is strong protection to keep your pension safe.

The first exception that could affect your pension is if you are receiving a lump sum payment. This sometimes happens when there is a delay in getting the pension payment initially or if there is a transfer from one spouse to another. There can also be a delay in payments if there is a question about eligibility or paperwork. In these rare cases, there can be a lump sum payment paid out to a pensioner. If that lump sum payment is more than three months’ worth of payments, your pension payment could be affected by a bankruptcy filing. If you think you are going to receive a lump sum payment, speak with an experienced bankruptcy attorney who can explain your rights and options based on the payment amount and payment date.

The second exception that could affect your pension is if the payment is not in a proper pension account. If you are receiving regular monthly payments from your or your spouse’s former employer, you should not have any issues and the bankruptcy should not affect your pension. You can double check to see if you have deducted the pension payments on your tax returns. Pension payments that are preapproved by the Internal Revenue Service as exempt from taxation are usually proper pension accounts. You can also request that the company who sends you pension payments provide you a copy of the “plan” paperwork. Most pension accounts are maintained or set up according to a “plan”. This plan paperwork will have language that a bankruptcy attorney can use to confirm that the pension account is maintained properly.

Unless these exceptions apply to your pension, bankruptcy should not affect your pension at all. Because most people’s pensions are straightforward, you should trust, but verify. Reach out to your pension company to get plan paperwork to be sure. Providing that information to your bankruptcy attorney is the verification we need to protect your asset.

Feher Law counsels individuals and business in making the right financial decision, which can include bankruptcy. Call our office at 727-359-0367 to discuss your options.

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