In my bankruptcy alphabet, R stands for Retirement.

Retirement plans and IRA’s are safe in whatever chapter of bankruptcy you file.  Your rights in an employer’s pension plan or a union pension plan are not even part of the property of your bankruptcy estate.  The Supreme Court held almost 20 years ago that ERISA qualified retirement plans are beyond the reach of bankruptcy trustees and of your creditors.

Perhaps the only good thing to come out of bankruptcy “reform” in 2005 was a provision that created an exemption available to everyone who files bankruptcy for up to a million dollars in an IRA.  That’s found in 11 USC 522(n).

Note that whether retirement savings are excluded from the estate or included in the estate but exempt, the law protects savings that are formally dedicated to retirement. You cannot simply earmark some asset or investment as your “retirement” savings and have it sail through bankruptcy.

Bankruptcy enables retirement savings

One of the most distressing fact patterns is the person who insists on paying minimum payments on credit card debt and has nothing left to save for retirement.  If you are both young and not too deep in debt, it may be doable to postpone retirement savings until the debt is gone.

But the older you are or the larger your debt, the more likely that you are creating a problem for yourself at retirement by lining the pocket of the banks today.

I may be like a broken record on this issue, but it is a theme that I pound on:  personal responsibility involves not just paying your debts but also making provision for your old age so you are not dependent on family, friends or Uncle Sam.

A bankruptcy discharge can free up cash flow to make regular contributions to retirement savings.  Think about it if you plan to live long enough to retire.

Image courtesy of Leo Reynolds.

My friend Jay Fleischman insists R is for Redemption.

Ryan Caldwell chose reaffirmation  along with Bill Balena.

Bob Doig votes for repossession. as did Stuart Ing.

A bill to again revise California Exemptions, introduced by Assembly Member Wieckowski, has recently passed the Assembly without opposition and is now in the Senate.? On June 14, 2011 the bill was favorably reported out of the Senate Judiciary Committee and is slated to be taken up by the Senate Appropriations Committee within the next few weeks.? It appears to be on a fast track.
The stated purpose of the bill is as follows:

This bill would revise and recast those alternative exemption provisions and would, among other things, increase the exemption available for the debtor’s interest in motor vehicles; jewelry, heirlooms, and works of art; and tools and other items used in the debtor’s trade, business, or profession or in the trade, business, or profession of the debtor’s spouse. The bill would revise the alternative exemption provisions relating to household furnishings, life insurance contracts, wrongful death and personal injury actions, unemployment compensation payments, and cemetery plots and would add to those alternative exemption provisions exemptions for workers’ compensation benefits, specified aid payments and relocation benefits, and financial aid for higher education.

Existing law provides an exemption from enforcement of a money judgment for a homestead, as defined, in specified amounts.

With regard to the homestead exemption in CCP section 704.730, the bill results in the increase in the exemption amounts as follows:

Current Law	Proposed Change
Individual	$75,000	$150,000
Family Unit	$100,000	$250,000
Over 65/Disabled/Low Income	$175,000	$350,000

The bill also increases the maximum income allowed to qualify for the low income homestead exemption for people from $15,000 to $22,000 for an individual and $20,000 to $29,000 for a married couple.

With regard to the exemptions applicable if no homestead is claimed,? CCP section 703.104(b), the bill does not increase the wildcard, per se, but does increase other provisions and also creates new exemptions such that the total amount exemptible has now increased substantially.? .? The stated purpose of these amendments is to conform the CCP Section 703.140(b) exemptions to the CCP Section 704.010 et seq. exemptions to protect those without homes in the event they file for bankruptcy protection.?? While the language of the changes to the CCP Section 703.140(b) exemptions would appear to parallel the CCP Section 704.010 et seq. exemptions, the amounts are not the same. ?The exemptions available under CCP Section 703.140(b) are substantially higher than those in CCP Section 704.010 et seq.

For example, a burial plot which previously was included under CCP section 703.140(b)(1) now has its own separate section, new CCP section 703.140(b)(17) and is exempt without regard to value.

A chart of certain of the increases follows:

Property Exempt	Current Law	Proposed Change
Vehicles	$3,525 (one vehicle only)	$4,800 of aggregate equity
Jewelry, heirlooms and works of art	$1,425	$5,000
Tools of the Trade	$2,200	$6,075 (and if married both spouses entitled to claim exemption)
Unmatured life insurance including annuities but not the loan value	$11,800	unlimited
Loan value of unmatured life insurance	included in $11,800 above	$9,700 (and if married both spouses entitled to claim exemption)
Personal Injury	$22,075 (for actual pecuniary loss)	unlimited

The Bill will result in a reduction in the number of bankruptcy cases administered with assets.? In other words, Debtors, without homes to protect in Chapter 7 bankruptcies, will be able to protect more assets.? Summary by Elissa Miller of Sulmeyer, Kupetz, PC in LA.

These changes are proposed, not passed.