A Question About Private SS Accounts and the Bankruptcy Bill

[maxrandb]

I saw this talked about it a couple of threads, but I thought that it may deserve it's own. I never got an answer to this question.

I believe that right now, Social Security benefits are exempt from garnishment, etc when you file bankruptcy. What about any private accounts that may be created? Is your 401K, or IRA protected if you file bankruptcy?

I honestly think that this "thanks for the campaign contributions credit card companies" bankruptcy bill that is being forced through may be a way to regain Democratic control of at least one branch of government. I mean look at it!

The repubs have gone on record supporting credit card companies over

- Military members
- Reserve and National Guard Troops
- People with catastrophic health care costs
- People in financial ruin because of divorce (probably intentional to "protect marriage")
- Entrepreneurs that lose their shirts trying to start new businesses
- People in financial ruin because of a lost job or outsourcing
- Middle class Americans and poor Americans that are victimized by unscrupulous credit card companies
- The elderly
- The young
- The middle aged

etc....

However, corporations and "Kenny Boy" Lay are "good to go".

But that aside, my basic question is; "is there anything in the bankruptcy that protects any private accounts created under Social Security"?

Also, would it be beneficial for Dems to bring this up, or do you think that even the mention of "private accounts", (even to protect from bankruptcy) by a DEM would give the repukes the opening they are looking for?

[Cary]

1. Bankruptcy exemptions are currently defined, for the most part,

by state law. At least here in Illinois, retirement accounts are exempt and the new accounts would presumably be exempt too.

But then again Republicans hate the middle class, so who knows what they would do?

[maxrandb]

2. So There is No Federal Protection

for Social Security benefits?

If my Grandmother has to file bankruptcy, and her only source of income is Social Security, the state could take that under state law for bankruptcy?

I thought there were federal protections in place for Social Security.

[Jacobin]

3. Most (probably all, I just don't know) states

exempt retirement accounts, social security, IRA's etc from seizure by creditors and so they would be exempt in a bankruptcy proceeding

[peacetalksforall]

4. From what I have read...each state is different and there is sometimes

a choice between selecting state or federal exemptions. Some states exempt pension payments.

My own question - IRAs are supposed to be used as equivalents , alternatives, supplements to pensions. 401Ks are an alternative to traditional pensions, the empolyer matches and administrates. So, if it gets down to terminology, are IRAs and 401ks included in the definition of 'pension'.

[happyslug]

6. Federal exemptions are here: 11 USC Section 522

(d) The following property may be exempted under subsection
(b)(1) of this section:
(1) The debtor's aggregate interest, not to exceed $15,000 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor.
(2) The debtor's interest, not to exceed $2,400 in value, in one motor vehicle.
(3) The debtor's interest, not to exceed $400 in value in any particular item or $8,000 in aggregate value, in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor.
(4) The debtor's aggregate interest, not to exceed $1,000 in value, in jewelry held primarily for the personal, family, or household use of the debtor or a dependent of the debtor.
(5) The debtor's aggregate interest in any property, not to exceed in value $800 plus up to $7,500 of any unused amount of the exemption provided under paragraph (1) of this subsection.
(6) The debtor's aggregate interest, not to exceed $1,500 in value, in any implements, professional books, or tools, of the trade of the debtor or the trade of a dependent of the debtor.
(7) Any unmatured life insurance contract owned by the debtor, other than a credit life insurance contract.
(8) The debtor's aggregate interest, not to exceed in value $8,000 less any amount of property of the estate transferred in the manner specified in section 542(d) of this title, in anyaccrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the debtor under which the insured is the debtor or an individual of whom the debtor is a dependent.
(9) Professionally prescribed health aids for the debtor or a dependent of the debtor.
(10) The debtor's right to receive -
(A) a social security benefit, unemployment compensation, or a local public assistance benefit;
(B) a veterans' benefit;
(C) a disability, illness, or unemployment benefit;
(D) alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor;
(E) a payment under a stock bonus, pension, profitsharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, unless -
(i) such plan or contract was established by or under the auspices of an insider that employed the debtor at the time the debtor's rights under such plan or contract arose;
(ii) such payment is on account of age or length of
service; and
(iii) such plan or contract does not qualify under section 401(a), 403(a), 403(b), or 408 of the Internal Revenue Code of 1986.
(11) The debtor's right to receive, or property that is traceable to -
(A) an award under a crime victim's reparation law;
(B) a payment on account of the wrongful death of an individual of whom the debtor was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor;
(C) a payment under a life insurance contract that insured the life of an individual of whom the debtor was a dependent on the date of such individual's death, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor;
(D) a payment, not to exceed $15,000, on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual of whom the debtor is a dependent; or
(E) a payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

http://caselaw.lp.findlaw.com/casecode/uscodes/11/chapters/5/subchapters/ii/sections/section_522.html

[maxrandb]

8. Thanks! n/t

[happyslug]

10. Here is the Federal Bankruptcy rule permitting the use of State Exemptions

Below is the FEDERAL BANKRUPTCY LAW Regarding the option of taking the State or Federal Exemptions. Paragraph (b)(1) permits anyone to use the Federal Exemptions but Paragraph (b)(2) permits people to use all exemptions permitted during a Sheriff Sale of a Person's Property. Note (b)(2) covers both Federal AND State Exemptions, but only those exemptions that exists other than under the Bankruptcy code. Thus you can opt for the State Exemptions of your state or the Federal Exemption under Paragraph (b) (1) but not both.



(b) Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate the property listed in either paragraph (1) or, in the alternative, paragraph (2) of this subsection. In joint cases filed under section 302 of this title and individual cases filed under section 301 or 303 of this title by or against debtors who are husband and wife, and whose estates are ordered to be jointly administered under Rule 1015(b)of the Federal Rules of Bankruptcy Procedure, one debtor may not elect to exempt property listed in paragraph (1) and the other debtor elect to exempt property listed in paragraph (2) of this subsection. If the parties cannot agree on the alternative to be elected, they shall be deemed to elect paragraph (1), where such election is permitted under the law of the jurisdiction where the case is filed. Such property is -
(1) property that is specified under subsection (d) of this section, unless the State law that is applicable to the debtor under paragraph (2)(A) of this subsection specifically does not so authorize; or, in the alternative,
(2)(A) any property that is exempt under Federal law, other than subsection (d) of this section, or State or local law that is applicable on the date of the filing of the petition at the place in which the debtor's domicile has been located for the 180 days immediately preceding the date of the filing of the petition, or for a longer portion of such 180-day period than in any other place; and
(B) any interest in property in which the debtor had, immediately before the commencement of the case, an interest as a tenant by the entirety or joint tenant to the extent that such interest as a tenant by the entirety or joint tenant is exempt from process under applicable non-bankruptcy law.

[happyslug]

5. The exemptions will Continue but Chapter 13 will be used to give them up.

When My father was losing his farm in the early 1960s he cashed in his WWII life insurance in an effort to keep the farm. The Life Insurance was exempt under Bankruptcy but he had cashed the policy in in the months before filing. He thus made the mistake of transferring a non-attachable assets to an attachable asset and under the Bankruptcy law of the time period he lost it all.

I can see similar attempts under the proposed amendments, people knowing they can not file Chapter 7 convert items exempt under Chapter 7 to cash to save their homes (or to pay off other debts to avoid Chapter 13). I can even see the chapter 13 plan to include using non-attachable assets to pay of debts (Thus converting non-attachable assets to attachable assets). You could extend this to any proposed private SS accounts.

I just do not like the proposals for I see to many people being hurt.

[hootinholler]

7. I thought you were going to say

That SS reform was a distraction to allow the bankruptcy bill to be ram-rodded through. Precious little mention in the press about it.

-Hoot

[liberalhistorian]

9. God alone knows

the answer if this bill passes, if we can't stop it. There was talk about removing the exemptions for retirement pensions and similar funds, and with the repukes in charge that certainly wouldn't surprise me at all!