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IRA Accounts Can Be Protected In Bankruptcy Despite Limitations

Posted By Allmand Law Firm, PLLC || 23-Jan-2014


One reason many consumers overlook the possibility of filing for bankruptcy is fear of losing retirements funds such as an IRA (Individual Retirement Account). While there may be limitations on how much of your retirement funds can be protected, in most cases the funds you have saved can be protected without further questioning. It is a matter of discussing concerns or questions about your retirement accounts with an experienced bankruptcy attorney to get clarity of how such assets are protected.

While an IRA account is used to help individuals save for retirement, it is a personal option to take out a loan using the same funds. You may incur a penalty if you withdraw from the account before age 59 ½. For a Roth IRA, the same penalty may apply, but you may be required to pay more in income taxes depending on how much you contribute to your plan and the type of plan you start.

When the bankruptcy code was revised in 2005 it made it easier for debtors to protect such assets from creditors. Thousands may be eligible for protection under the bankruptcy code depending on how long contributions have been made on the account. Other retirement accounts such as a 401(k), pension plan and various types of IRA accounts may have different or similar cap limitations depending on your state of residency and what the code allows.

The bankruptcy code often recognizes that such funds have a designated purpose and may qualify as an exempt asset. Discuss questions or concerns about your retirement funds with a bankruptcy expert.

Categories: Bankruptcy
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