Protecting Your Rights And Your Future

Retirement plans and IRAs are protected in bankruptcy

| Nov 13, 2014 | Personal Bankruptcy

Since 2005, it has been clear in Arkansas and elsewhere that a person filing a personal bankruptcy would be able to keep his government qualified retirement funds, including personal IRAs, despite the bankruptcy. Some plans had been protected from bankruptcy liquidation even before that through a number of court cases, but it remained unclear which types of funds would be exempt. Additionally, as a general rule personal IRAs were given no protection. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) clarified the matter by statute, making virtually all government-recognized plans and personal  IRAs exempt.

Under BAPCPA, up to $1,245,475 of an IRA or Roth IRA is exempt, meaning that it can’t be touched in the bankruptcy and will remain the property of the bankruptcy filer. As for company retirement plans, including IRAs, they ‘re completely exempt in  a bankruptcy. Furthermore, if company plan funds are rolled over to an IRA, the funds remain exempt. BAPCPA also provides that retirement funds in transit from one plan to another are exempt.

Thus, since 2005 an individual or married couple filing a Chapter 7 or Chapter 13 Bankruptcy, have felt secure in knowing that their restricted retirement funds are not going to be lost in the bankruptcy. A recent case in Ohio has gone so far as to say that even when a couple withdraws a significant sum of money from an IRA account, the funds do not lose their exempt status for purposes of the bankruptcy. However, because the case was decided under Ohio state law provisions, it is best to tread easily in expecting the same outcome across the board.

In a bankruptcy filed in Arkansas, it doesn’t matter how much in unsecured debt that you may discharge. The amount of debt that you are erasing has no bearing on the legal protection given to your retirement funds. Of course, it is always recommended that you consult with local bankruptcy counsel to make sure that there are no complications in your own particular facts that would create an exception to the foregoing principles.

Source:, “IRA funds protected in bankruptcy“, Ed Slott, Nov. 9, 2014