San Diego Bankruptcy Lawyer| Can I Keep My Retirement and Pension Accounts?

Can I Keep My Retirement and Pension Accounts?

Usually, yes. As long as the retirement accounts or retirement plans are qualified under the Internal Revenue Code generally yes.  After the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005 all retirement funds exempt from taxation under Sections 401, 403, 408, 408A, 414, 457 and 501 of the federal tax code are now protected from the reach of creditors in bankruptcy. Since IRAs are covered by Section 408 of the tax code, we finally have uniform treatment of IRAs and qualified plans in bankruptcy, with one exception (noted below). Most importantly, the protection of IRAs under BAPCPA applies without regard to the state in which the debtor resides, and without regard to the extent to which the IRA assets are necessary for the support of the debtor and his or her family.

Under the exception, the amount of the protected IRA assets is limited to $$1,171,650. However, this limit is applied without regard to any rollover contributions from qualified plans. Therefore, under BAPCPA, an individual can roll assets from a qualified employer plan into an IRA with the comfort that 100 percent of the rollover amount (and investment earnings thereon) is protectible in bankruptcy, without regard to the state or states in which they reside currently or at any point in the future.   However, analyzing retirement accounts as they relate to ERISA, the Internal Revenue Code, and the Bankruptcy Code should be done with the assistance of counsel.  Also see my blog post, “Are Inherited IRA Accounts Exempt in Bankruptcy?“