When you're exploring options for resolving debt, it helps to know that some of your most important financial resources are already built to stay protected. Social Security benefits and retirement savings accounts carry strong legal protections, and those protections may carry through the bankruptcy process.
Social Security Income Stays Yours
Social Security benefits receive dedicated protection under federal law. These benefits are excluded from the bankruptcy estate, meaning they are not treated as an asset available to creditors.
Social Security income comes in a few forms, and all of them receive the same protection:
- Retirement benefits
- Social Security Disability Insurance (SSDI)
- Supplemental Security Income (SSI)
Social Security income is also excluded when calculating your "current monthly income" for the Chapter 7 means test, so it never counts against you when determining eligibility. You can rely on your Social Security benefits as you always have, both during and after your case.
Retirement Accounts Receive Strong Protections
The retirement accounts you've spent years building can also receive substantial asset protections during bankruptcy. Qualified retirement plans under federal law are generally fully exempt from the bankruptcy estate, meaning the funds you've set aside for your future remain with you.
This protection generally extends to:
- 401(k) and other employer-sponsored retirement plans
- Pensions
- Traditional IRAs
- Roth IRAs
The dollar amounts that can be protected through bankruptcy are periodically adjusted. For an estimate of what can be protected if you file for bankruptcy, you should always speak with a bankruptcy attorney.
Chapter 7 & Chapter 13 Offer the Same Peace of Mind
Whether Chapter 7 or Chapter 13 turns out to be the better fit for your situation, retirement income and retirement account protections generally apply the same way in both. Chapter 7 offers a more streamlined resolution of qualifying debts, while Chapter 13 creates a structured repayment plan over time. Either way, your Social Security income and retirement savings stay protected, so you can focus on choosing the path that fits your goals rather than worrying about your long-term security.
Florida Adds Even More Bankruptcy Protection
Florida is known for offering some of the most generous exemption protections in the country, and retirement accounts are no exception. In several respects, Florida law extends broader protection to retirement savings than federal law provides on its own. This extra layer often means that much more security for your retirement accounts if you file in Florida, giving you one more reason to feel confident about your financial future.
Inherited IRA accounts can be treated a bit differently than the ones you've built yourself. The encouraging news is that Florida law has taken steps to extend protection to inherited retirement accounts as well, something that isn't automatically guaranteed everywhere.
We're Here to Make Sure Everything Is Protected
Every bankruptcy case is different, and the exemptions available to you depend on your specific accounts, your filing chapter, and current law. As a team of Brevard County asset protection attorneys, Buchalter & Pelphrey takes the time to review every retirement account and income source you have, so each one should receive the protection it's entitled to under Florida and federal law.
When you work with us, we take the time to review:
- Every retirement account you hold
- All sources of income, including Social Security
- Any inherited accounts that may need special attention
- Which filing chapter best protects your overall financial picture