Impact of New Bankruptcy Act on Retirement Assets and College Savings - Part 2

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was signed into law on April 20, 2005, and, generally, is effective for bankruptcy fillings made on or after October 17, 2005. The federal pension rules provide that benefits under a qualified pension plan may not be assigned or alienated. Thus, assets in an ERISA qualified plan are excluded from a bankruptcy estate if the plan contains an anti-alienation clause. The bankruptcy code excludes any property subject to a transfer restriction that is enforceable under non-bankruptcy law. The Bankruptcy Abuse Act provides more uniform treatment of retirement assets, regardless of whether a debtor has elected to file under federal or state law exemptions. Congress provided that if a retirement plan received an IRS determination letter confirming the qualified status of the plan, it shall be presumed exempt, i.e., that it will qualify for bankruptcy protection, unless the plan has been disqualified by the IRS.