Retirement Investing while Paying Off Student Loans


Why would I save for retirement when I am paying off my student loan debt?  This doesn’t make any sense!  Oh yes it does!!!!  While you might think it is better to pay off all of your debt before saving for retirement, think again.  Not only do you need to save regularly for retirement but you also need to keep your life moving forward in spite of your student loan debt.  Here’s how it’s done.  Every year, you have the opportunity to invest $5000 into a Roth IRA.  You might think that this is not a lot of money, but add it up over 40 years and you see the magic.  Bottom line, the most important aspect of this type of savings is that it is protected from bankruptcy. If you are self-employed and go bankruptcy 6 times during your life, ALL OF YOUR RETIREMENT SAVINGS ARE PROTECTED.    This means you can take lots of risks during your lifetime and even have good and bad years of income and file bankruptcy and then end up with a nice protected amount of retirement savings.  This is how smart entrepreneurs protect their family while trying to make a go of their business ideas, many of which fail, but if just one is successful even at the end of it all – it’s all worth it and you have retirement savings as well.

Veterans Benefits Are Exempt in Bankruptcy and Illinois

Marines Raising Flag Over Iwo Jima

Marines Raising Flag Over Iwo Jima

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Veterans Benefits Are Exempt in Bankruptcy and Illinois.  These benefits are exempt under the Illinois Statutory Exemptions found at 735 ILCS 5/12 1001(g) (2).  The Federal Exemptions at 11 U.S.C. 522(d) are prohibited in Illinois pursuant to 11 U.S.C. 522(b) which authorizes the state prohibition and Illinois Statute 735 ILCS 5/12-1201 which prohibits the Federal Exemptions in Bankruptcy and provides exemptions under 735 ILCS 5/12 1001.

There are some significant limitations to this exemption:  Only current and future payments are exempt.  Saved benefits are not exempt.  Case law construes this by stating that the benefit is to provide some minimal level of income and not be a windfall to the debtor.  Even saved benefits that segregated and ONLY veterans’ benefits proceeds and are traceable to those Veterans’ Benefits Payments are not exempt under 1001(g).   In other words any accumulation of benefits more than one month of payments is going to become property of the bankruptcy estate and would be subject to seizure by the trustee if not exempt under another exemption.

This is contrasted with the exemption provided under 735 ILCS 5/12 1001(h) which talks about the debtor’s right to receive, or property that is traceable to:  (1-5 – personal injury, wrongful death, life insurance and other claims very different from Veteran’s Benefits)

Statutes:  735 ILCS 5/12 – 1001(g) (2) (Illinois Veteran’s Benefit Bankruptcy Exemption)

Statutes:  735 ILCS 5/12-1201 (11 U.S.C 522(b) authorizes State of Illinois to prohibit use of Federal Bankruptcy Exemptions under 11 U.S.C. 522(f))

Case Law:  Fayette County Hospital v. Reavis, 169 Ill.App.3d 246, 119 Ill. Dec. 937; N.E.2d 693 (Ill.Ap. 5 Dist., 1988); In Re Marriage of Pope-Clifton, 355 Ill.App.3d 478, 291 Ill.Dec. 315, 823 N.E.2d 607 (Ill. App., 2005); In Re Schoonover, 331 F.3d 575 (7th Cir. 2003); In re Russell (Bankr. C.D. Ill., 2013)

Click Here to Download and View the Supporting Statutory and Caselaw Research for this Blog Article

Veterans Benefits Exemption Research

asset protection ira

asset protection ira

Did you know that before April 15th every new year you can contribute to two iras at the same time? For example you can contribute $5000 to the 2012 Ira and $5000 to the 2013 Ira.

Did you know that retirement account contributions to an Ira or other retirement plans are exempt on bankruptcy. However these contributions must vest. 8 months after the contribution 60% has vested. 2 years after the contribution 100% is vested.

For retirement planning this is a great way to get caught up in a year where you have extra money available to invest.

For some one facing bankruptcy filing in the long term this can be a place to put savings and not lose them if above the wildcard exception. Be advised that no bankruptcy attorney will ever advise preferring contributions to retirement accounts over paying creditors but we can advise of the treatment and the applications that others have used.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. CALL 877-GO-GO-NLO (877-464-6656) FOR A FREE BANKRUPTCY CONSULTATION TODAY! SATURDAY APPOINTMENTS ARE AVAILABLE.