Can I Protect My Benefits and Pensions When I File for Bankruptcy?

Consumer bankruptcy often comes with many misconceptions, including that a debtor will lose all of her property when she files for an Illinois Chapter 7 bankruptcy.  Whether you’re filing for Chapter 7 or Chapter 13 bankruptcy in Illinois, our state has a set of exemptions that allow you to retain certain property when you file for bankruptcy.  While many Chicago residents are most concerned about the homestead exemption, which allows you to keep a certain value from your home, it’s also very important to understand how bankruptcy will affect your benefits and pensions.  
Can you protect pensions and benefits in bankruptcy?  In short, the answer is yes.  However, you should keep in mind that bankruptcy proceedings can be quite complicated, and it’s essential to have an experienced Oak Park bankruptcy lawyer on your side.  The Emerson Law Firm has years of experience assisting Chicago residents with consumer bankruptcies and can answer your questions today.
Protecting Your Pension with a Bankruptcy Exemption
What is a pension, exactly?  According to CNN Money, pensions are retirement accounts that are maintained by an employer.  When you retire, you get a fixed payout from your pension.  In other words, “it’s a kind of defined benefit plan” for retirement.  The amount each employee receives from a pension depends on a number of factors, including the length of your employment and your salary while you were employed.  Typically, pensions allow you to choose between a monthly payment during retirement or a single, lump-sum payment.
Pensions generally are 100 percent exempt during bankruptcy.  Specifically, Illinois law indicates that pensions from the following jobs are exempt:
·      General assembly members
·      Police officers
·      Firefighters, including disabled firefighters, widows of firefighters, and children of firefighters
·      State employees, including employees of state universities
·      Municipal employees
·      County employees
·      Civil service employees
·      Teachers
·      Judges
·      Park employees
·      Sanitation district employees
·      Corrections employees
·      Public library employees
·      Public employees generally
In addition, under Illinois law, all ERISA-qualified benefits and individual retirement accounts (IRAs) are exempt.  While Illinois law doesn’t specifically provide an exemption for tax-exempt retirement accounts like 401(k)s or 403(b)s, federal bankruptcy law does provide an exemption for these types of pensions.
Other Benefits Exemptions
Pensions aren’t the only kind of benefits that are exempt during bankruptcy.  Under Illinois law, debtors can also exempt the following benefits:
·      Public assistance benefits, such as medical assistance, benefits from the Supplemental Nutrition Assistance Program (SNAP), and Women, Infants, and Children (WIC) benefits
·      Workers’ compensation benefits, including awards and recoveries connected to occupational illness or injury. You can also exempt workers’ occupational disease compensation.
·      Social Security benefits
·      Unemployment benefits
·      Veterans’ benefits
·      Restitution payments, including those for Japanese Americans and Aleuts
·      Compensation and benefits for victims of crime
A Chicago bankruptcy attorney can help you to learn about the exemptions for which you might qualify when you file for personal bankruptcy.  While these benefits typically are those that are exempt under Illinois law, you may be eligible for other important exemptions that can help to protect certain assets when you file for a Chapter 7 bankruptcy.
Contact a Chicago Bankruptcy Lawyer
For many Illinois residents, consumer bankruptcy is a tool that can help to relieve the anxieties of serious debt.  If you are considering filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy, it’s extremely important to discuss your situation with a Chicago bankruptcy lawyer.  The laws governing bankruptcy in Illinois can be confusing, but the Emerson Law Firm can help you through this process.  Contact us today to learn more.
See Related Blog Posts:
Misconceptions About Consumer Bankruptcy in Chicago

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