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RJS LAW: San Diego Tax Attorney | IRS | FTB | CPA | California

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(619) 595-1655
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    • Ronson J. Shamoun, ESQ., LL.M.
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  • Home
  • About
    • Ronson J. Shamoun, ESQ., LL.M.
    • Chandara Diep, ESQ., LL.M.
    • Devon J. Arabo, ESQ., LL.M.
    • Brian M. Malloy, Esq.
    • Andrea Cisneros Valdez, Esq., LL.M.
    • Sam Imandoust, ESQ., LL.M
    • Lauren Suarez, ESQ., LL.M.
    • John I. Forry, Esq.
    • Martin Schainbaum, ESQ., LL.M.
    • Kaveh Imandoust, JD, MBT, CPA
    • Joseph Cole, ESQ., LL.M.
    • Christopher Engelmann, ESQ., LL.M.
    • Remy Hogan, Esq., LL.M.
    • Steve S. Mattia, Esq.
    • Dod Ghassemkhani, ESQ.
    • Vincent Renda, Esq.
    • Pedro Bernal, Esq.
    • Sabri P. Shamoun 1938-2023
    • Melanie M. Shamoun
    • Renae Arabo
    • Hilary Dargavell
    • Sandie Portilla
    • Lupita C. Torres
    • Jewell Cornejo
    • Kesia Belford
    • Danielle N. Misleh
    • Judith G. Jeremie, JD
    • Rebecca Shuman
    • Michael Lutzky, CPA
    • Gianna Iskander
  • Practices
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS LAW for IRS Appeals
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • What are IRS Field Audits?
          • Initial IRS Compliance Center Audits
          • IRS Office Audits
          • What happens in an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • NOTICES
          • IRS Notices
          • IRS Letters
          • FTB Notices
          • Avisos en Español
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearing
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • ACS – Automated Collection System
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • RJS LAW Approach to Collections
          • IRS Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders TAO
        • IRS Payroll Tax
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • Trust Fund Recovery Penalties
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing an Offer in Compromise to the IRS
          • How does the IRS evaluate an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Choose RJS LAW?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
      • STATE TAX MATTERS
        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • CDTFA – California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration – CDTFA
        • California State Tax Matters – California Franchise Tax Board | FTB | EDD
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • CORPORATE TAXES
      • TAX COURT LITIGATION
      • Innocent Spouse Relief
    • International Tax
    • Visa Gold Card
    • Estate Planning
    • Trust Litigation
    • Trust, Estate & Probate Litigation
    • Trust & Estate Administration
    • Probate
    • Bankruptcy
      • Bankruptcy (FAQ’s)
    • Civil Litigation
    • Criminal Defense
    • Accidents & Injury
    • Corporate & Transactional
    • Private Wealth Services
    • Real Estate Law
      • Landlord Tenant Law
    • Employment Law
  • Tax Institute
    • 10th Annual USD School of Law – RJS LAW Tax Institute
    • 9th Annual USD School of Law – RJS LAW Tax Institute
    • 8th Annual USD School of Law – RJS LAW Tax Controversy Institute – July 28th, 2023
    • 7th Annual USD School of Law – RJS LAW Tax Controversy Institute – July 15th 2022
    • 6th Annual USD School of Law – RJS LAW Tax Controversy Institute
    • 5th Annual USD School of Law – RJS LAW Tax Controversy Institute
    • 4th Annual USD School of Law – RJS LAW Tax Controversy Institute
  • Testimonials
  • Giving
    • Giving
    • RJS LAW Donates Billboard to the Girl Scouts
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    • Awards
    • Ronson J. Shamoun at events with various dignitaries
    • SD50 Extraordinary Leadership
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Will I lose My Retirement Account to Creditors in Bankruptcy?

Bankruptcy Retirement Account

Will I Lose My Retirement Account to Creditors in Bankruptcy?

For those considering bankruptcy as a debt relief strategy, a main concern is whether they will lose their retirement account to creditors as part of the process. The short answer is, “it depends.” In many situations, keeping retirement savings is possible, but this is not always the case. Working with the experienced bankruptcy team and specialists at RJS LAW is recommended to help guide you through the process and minimize losses.

What Does Bankruptcy Law Say About Retirement Savings?
Exemption laws in both Federal and California bankruptcy proceedings have been strengthened in the past few years and, in most cases, retirement savings are protected  from creditors. Retirement savings are usually not considered part of a “bankruptcy estate” and are therefore out of the reach of creditors.

Under federal bankruptcy law virtually all personal assets are considered part of the  “bankruptcy estate,” however, the law does exempt some assets from the proceedings. At the federal level and in California, contributions to most employer-based retirement plans, deferred compensation plans, and tax-deferred annuities are excluded from the estate.

Also excluded are retirement plans set up as trusts, which are commonly used today. Unfortunately, trusts set-up and funded by a single person who retains full control over the trust assets are not included in the exclusion. These trust arrangements would come under intense scrutiny from the bankruptcy courts.

In 2005, bankruptcy laws were reviewed and updated making it more difficult to obtain relief via bankruptcy. Exemptions were more narrowly defined. However, regulations for the protection of retirement and pension funds were expanded.

Exemption amounts are unlimited for most types of “qualified” retirement plans, which makes the full value of the retirement account protected from creditors. “Qualified” plans  include most ERISA qualified pension plans, including 401(k)s, 403(b)s, Keoghs, profit sharing plans, stock bonus plans, employee annuities, government deferred compensation plans, money purchase plans, and defined benefit plans.

For Traditional and Roth IRA’s, there is a ceiling limit as to the amount of money exempted. The upper limit is currently $1,171,560 per individual – a number adjusted for inflation every 3-years.

Besides qualified retirement accounts, other protected assets under California law include veterans’ benefits, Social Security, as well as retirement benefits for civil service, foreign service, military service employees, railroad employees and military survivor benefits.

Understanding California’s Use of Federal Bankruptcy Exemptions

With the protection offered by the U.S. government, why would additional layers of California exemptions be useful? In most situations, California’s additional exemptions are indeed redundant. However, in some areas California’s exemptions are broader and can make a real difference to the overall outcome of a bankruptcy.

For example, while funds invested in retirement accounts are usually exempt from bankruptcy proceedings, retirement benefits paid to you as income may not be exempt under federal law. Fortunately, California Code of Civil Procedure Section 704.115 offers protection of retirement income (not just the money in a retirement fund) from the reach of creditors.

The California exemption continues to protect the retirement money once received. This is a critical protection as bankruptcy rules are usually quite stringent with cash balances for those who file.   

Conclusion
With the various layers of protection under existing law, in many situations retirement account would be exempt and untouchable to creditors. Bankruptcy courts usually retirement accounts in unusual cases or when the retirement plan appears inappropriate.

None the less, bankruptcy law is quite complicated and could endanger assets, even in normal circumstances where retirement plans were rolled over to qualifying plans or amounts were borrowed against from the retirement plan.

If you are considering bankruptcy, contact the experienced legal team at RJS LAW. We will discuss options on how best to protect the retirement benefits accumulated through your hard work and help you develop a plan best navigate the bankruptcy process. Call today for a no-obligation consultation at (619) 595-1655.

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Filed Under: Bankruptcy, Bankruptcy Laws, Filing Bankruptcy Tagged With: bankruptcy, bankruptcy law, Retirement Account

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