Search Site
Menu

Are IRAs Exempt From Creditors During Chapter 7 Bankruptcy?

In a Chapter 7 bankruptcy (also known as “liquidation”), a court-appointed trustee is tasked with collecting and selling the debtor’s assets and using the proceeds to pay the creditors. However, the trustee cannot take everything. The debtor can legally retain ownership of certain assets, in whole or in part. These bankruptcy exemptions include various forms of retirement savings accounts.

Individual retirement accounts (IRAs) are substantially exempt under Chapter 7. Self-employment IRAs (SEP-IRA) and rollover IRAs are fully exempt. This means that the debtor can keep all monies held in either type of account as long as no fraud is involved. Traditional IRAs are protected within limits: Chapter 7 debtors can exempt funds of up to $1.3 million. The 11th Circuit Court of Appeals, which has jurisdiction over Georgia, has ruled that a Roth IRA — in which an owner deposits after-tax dollars and can withdraw accumulated funds tax-free at a certain age — is not part of the debtor’s bankruptcy estate. This means the funds in a Roth IRA are fully exempt in this state.

It is important for Chapter 7 filers to take full advantage of these exemptions. Many individuals rely upon IRAs and other savings plans to substantially fund their retirement. These accounts often comprise the major source of peoples’ assets in old age. It usually takes decades of diligent savings to build up sufficient retirement funds. Many IRA holders would simply not have enough time left in their working lives to rebuild retirement account balances if creditors could take all of that money. A Chapter 7 bankruptcy is designed to give debtors a ‘fresh start’ in their financial lives. It would make no sense to give people relief from debt only to face a life of poverty in retirement due to lack of savings.

Bankruptcy law is complex and exemptions are not automatically granted. Anyone who is considering filing for bankruptcy or seeking other forms of debt relief should contact a qualified bankruptcy attorney.

With six offices in the Atlanta, Marietta and Athens areas, Jeff Field & Associates is one of Georgia’s premier bankruptcy and debt relief law firms. Our attorneys guide each client through all available remedies with patience and compassion. If you are drowning in debt, facing foreclosure or being constantly harassed by bill collectors, feel free to contact us online or call 404-381-1278 for an initial consultation.

Leave a Reply

Your email address will not be published. Required fields are marked *

Videos
Our Attorneys
Client Reviews
  • google
    5.0/5.0

    Chris and Laura have been amazing! The process seamless! All of my questions and needs were addressed! I highly recommend this office for your BK needs!

    Read more

    Crystal Jackson

  • google
    5.0/5.0

    This is the best Bankruptcy Lawyers ever They treat you with respect and do not judge you for the mistakes you made.Mr.Sleeper and MS.Brown are the best they answered every question I had and if I couldn't reach them they always responded to my voice...

    Read more

    Mwells

  • google
    5.0/5.0

    Jeff Fields and Laura Everett were wonderful! It was hard but they were so helpful and with me every step of the way. They answered every question and were very accessible. I hope noone has to experience this road, but if you do, try Jeff Field & Ass...

    Read more

    Becky Sharpe

  • google
    5.0/5.0

    I had my concerns about filing initially, but Jeff walked me through the process and with his calm demeanor, made this process not at all as daunting as I initially thought it would become. The process flowed effortlessly and Cassie (a BIG shout out ...

    Read more

    Charita Willis

  • google
    5.0/5.0

    Due to medical expenses and serious physical problems I had to file bankruptcy. I was nervous and really depressed about the whole situation. I called Jeff Field & Associates and felt at peace after talking to a lawyer. I decided to go with them and ...

    Read more

    Sherri Ellis

See all reviews
Contact us

Please fill out the form below and one of our attorneys will contact you.

Quick Contact Form