In general, most retirement accounts are considered exempt property under California law (California Code of Civil Procedure §§ 704 and 703.140). This means that the retirement account is protected under the law and the trustee cannot take any money from the account in order to pay your creditors.
Generally, retirement accounts that are subject to The Employee Retirement Income Security Act of 1974 (ERISA) are protected under the law. Additionally, some retirement accounts that are not subject to ERISA, such as public retirement benefits are also exempt.
However, there are some exemptions to this protection. For example, if you have cashed in on your retirement plan or have withdrawn or taken money out of your plan, then your retirement plan may no longer be exempt. Therefore, prior to filing for bankruptcy, it may be best to leave your retirement plan untouched rather than to withdraw any money to pay off any debts.
The process of filing for bankruptcy relief is riddled with sensitive deadlines and legalities. Further, adding the complexities of attempting to exempt and protect certain assets such as pensions, IRAs, and retirement accounts is crucial to the future livelihood of a debtor and must be properly handled.
Thus, the filing of a chapter 7 bankruptcy with such assets should be handled by an experienced bankruptcy attorney. Please contact our office to schedule to obtain the experienced assistance of attorney, Gregory E. Nassar.