Legal Question in Bankruptcy in Minnesota

Pension and Bankruptcy

When I am eligible to begin my pension later this year, I will have one chance to elect a 51% lump sum distribution with the remaining 49% paid out monthly over my life. Last year, a sizeable judgment was entered against me as a result of a lawsuit. The judgment creditor has not yet attempted to collect. Because of the size of the judgment, I will need to declare bankruptcy if the judgment creditor tries to collect. I understand that an ERISA qualified pension is not property of a bankruptcy in the event of a filing and I will be able to receive my monthly pension benefit without fear of it being reduced or compromised. However, if I elect the 51% lump sum, is the total amount of the lump sum distribution protected from bankruptcy since the funds were part of my ERISA qualified pension or will I be required to report the 51% lump sum as an asset because I have use of the funds?


Asked on 1/10/08, 11:30 am

2 Answers from Attorneys
Sam Calvert Calvert Law Office

Re: Pension and Bankruptcy

Why are you waiting to file? Either make a deal with the judgment creditor now or file now. I would be very concerned that a judge would say: "It was exempt while in the ERISA plan, but since you took it out, it is just cash." Certainly you can expect a big fight over the issue--what does the creditor have to lose by trying to get the money you withdrew? The argument may in fact be winnable, but why risk it, and why put yourself through the expense?

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Answered on 1/10/08, 11:37 pm
Dennis Felix Felix Law Office, P. A.

Re: Pension and Bankruptcy

There are some judgments that are not dischargeble so that has to be determined first. If it is dischargeable, you should probably not wait to file bankruptcy. Then you can exempt the pension plan and later decide what decision you prefer to make. If you elect and take the money first, I doubt whether it remains exempt since it would then be fully available to you. Dennis J. Felix

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Answered on 1/10/08, 2:35 pm


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