Search Site
Menu
Could Bankruptcy Threaten Your IRA?

Serious mature couple checking domestic financesAs you prepare to file for Chapter 7 or Chapter 13 bankruptcy, it’s understandable to be nervous about your financial future. While you will undoubtedly take a financial hit, many of your assets will be protected, including your retirement accounts and pension plan funds.

Individual retirement accounts, or IRAs, receive certain federal protections through the Bankruptcy Abuse Prevention and Consumer Protection Act, which took effect in 2005. While creditors are prohibited from accessing funds in your IRA when collecting on the debt owed to them, there is a limit to how much money you can protect via a traditional or Roth IRA. This number changes on an annual basis. If you have more than one IRA, that limit applies to all the funds in all your accounts combined — not just to each individual account.

All other retirement accounts are protected by federal exemptions without regard to their worth as long as they are qualified accounts under the Employment Retirement Income Security Act (ERISA).

Be careful about taking IRA withdrawals

If you are thinking about withdrawing funds from your IRA before or during your bankruptcy proceedings, be sure to talk it over with your bankruptcy attorney first. A financial adviser may also provide key guidance. Transferring money from your IRA to a savings or checking account means that money will not be subject to the exemption protection afforded to it while it’s still in the IRA, unless that cash qualifies for a different exemption.

Once that cash is freed up, the bankruptcy court can go after it and you will have a hard time protecting the money. If your bankruptcy is a Chapter 7, it will go to a bankruptcy trustee, who will use it to pay your creditors. If you’re in the middle of a Chapter 13 bankruptcy, that money will become a factor in determining the amount of your plan payments.

Therefore, it is better to avoid making any IRA withdrawals so that you don’t throw a wrench in your bankruptcy proceedings. Keep that money where it is protected until you’ve completed the bankruptcy case.

To learn more about how bankruptcy affects IRAs and other retirement funds, reach out to a trusted bankruptcy attorney at Jeff Field & Associates. Call us at 404-381-1278 or contact us online to schedule a free 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Your email address will not be published.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

    This was a hard thing to do but Chris made it easy and explained everything in a way I understood the process. I would recommend anyone having to go through this to contact this office! Casey was great as well and the communication kept the whole tim...

    Read more

    Beth Carlin

  • google
    5.0/5.0

    Jeff Field & Associates handled my case start to finish in an outstanding fashion. All information regarding my case was always diligently emailed to me. Never once did I feel out of the loop of what was going on. Best staff ever! As specially Cas...

    Read more

    Mike Walker

  • google
    5.0/5.0

    Had a great experience with Jeff Field and Associates. Casey handled my case. They explained everything and kept me informed on things. Everyone who supported me in this time of need was very nice and pleasant. Thank you all so very much for all your...

    Read more

    sandra campuzano

  • google
    5.0/5.0

    The staff made a very stressful situation much easier to cope with. They treated me with kindness and respect. Chris and Laura are very professional and knowledgeable.

    Read more

    Anita York

  • lawyers
    5.0/5.0

    The Entire team at Jeff Field and Associates were so helpful throughout the entire process. They were quick with responses and handled everything. They dont make you feel bad about your decision, and provide very helpful advice. Mr. Fields was always...

    Read more

    Client

See all reviews
Contact us

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

Quick Contact Form