When you file for Chapter 7 or Chapter 13 bankruptcy protection in New York, you will be able to keep your MTA or New York State Pension in almost all cases. Bankruptcy laws exist to provide people with a fresh financial start by eliminating their debt without forcing them to lose everything they own. The laws are intended to help you, and our clients keep almost all of their retirement accounts (and all other assets) in their bankruptcy.
One of the tragedies we frequently see in our offices in New York is people who have worked their whole lives for the MTA only to end up having to sadly use their pensions or retirement to pay down their toxic debt. They are always trying to do the right thing, but it is a very harsh realization for most of them when they learn they could have kept all of their retirement funds and eliminated their bad debt as well had they gotten in touch with us sooner. We hate to see good people having to spend their hard earned and well deserved retirements only to appease the worst types of predatory lenders and credit card companies.
The exemptions in New York (what you get to keep even though you filed bankruptcy) are very broad, and New York law also allows a filer to choose between state or federal exemption systems, giving our clients many ways to protect their pensions and other assets.
Under the new bankruptcy laws that Congress overhauled in 2005 retirement accounts are now considered exempt property, and all New York State, and MTA pensions are now protected, or exempt, from creditors. Section 522 (b)(3)(c) of title 11 of the United States Bankruptcy Code automatically exempts all tax exempt pensions and retirement accounts, even if the consumer opts to use their state’s exemption system. New York law allows a filer to choose either the state or the federal exemption system when filing, but they may not mix and match exemptions from the two. So by having these automatic federal protections for this now exempt property, both retirement funds and pensions can now be 100% protected from creditors. The exemption amounts are also unlimited, so with only a few exceptions, our clients’ entire retirement accounts will be protected in their bankruptcy for their full amount.
And it gets better, because in addition to your retirement account being protected, federal exemptions may actually allow you to claim other exemptions in relation to your pension as well. Exemptions against any payments you might be planning to receive from stocks, annuities or other profit sharing type plans can be claimed if you were to become sick or injured or if it becomes necessary for the support of your family. This means you will have protection for both your pension and for any future payouts that may be scheduled in your retirement plan. There are some limitations to this if you were to be employed by a family member at the time the retirement plan was devised, but in most cases all future payouts in your retirement plan are protected as well.
In light of the state and federal laws and the various exemptions surrounding tax exempt retirement accounts and pensions, nearly all New York State pensions and MTA pensions are protected in their full amount in a Chapter 7, or Chapter 13 consumer bankruptcy. If you live in New York and are considering bankruptcy protection but are worried about how your New York State or MTA pension might be affected, please call the Law Office of William Waldner at 212-244-2882 to arrange for a free bankruptcy consultation today. We want to help you eliminate your debt and give you a fresh start without you having to liquidate your retirement fund or lose any of your valuable possessions. We offer free consultations, only practice bankruptcy law, and as of the date this article was published 9/31/16 have a 99% Chapter 7 discharge record in New York City.
This article is intended for educational purposes only. By reading this article no attorney-client relationship has been created.